Why Business Owners Avoid Exit Planning

You know the value of starting early. Business owners should be thinking about exit planning years before they intend to sell. So why do so many avoid it like the plague? This resistance isn't just a missed opportunity; it can significantly impact their financial future and the legacy of their business.  

Darren Cherry, an exit advisor and Area President with FocusCFO, has a rule of thumb that exit planning should start once a business owner reaches the age of 45 – for good reason.  

First, as Certified Exit Planning Advisors (CEPA^®) know well, not every business is ready to sell in its present form. Many struggle with customer concentration, while others may struggle with high owner dependency. Both scenarios are very common. Both affect the value of the company in the eyes of potential buyers, and both take time to resolve, whether it’s diversifying the customer base or removing responsibility from the owner’s plate.  

By starting the exit planning process early, owners can substantially increase the value and appeal of their businesses when they eventually hit the market.  

“It’s not succession planning; it’s a succession system that business owners need to undergo, and those things will take time,” Cherry said.  

Let's delve into the common reasons business owners put off this vital process and explore how CEPAs can effectively break down these barriers. 

5 Reasons Business Owners Avoid Exit Planning 

Current Priorities  

This, according to Cherry, is one of the biggest barriers to the exit planning process.  

“Most business owners are running 100 miles per hour and working 80 hours per week and will look at exit planning as another thing to do,” he said.  

Many owners struggle to remove themselves from day-to-day operations, and they become firefighters instead of leaders, Cherry said. Owner dependency not only leaves little time for forward thinking and strategic planning, including for a potential exit, but it can also make the business less attractive to a potential buyer.  

Reducing owner dependency by hiring up around the owner is an investment that allows the business owner to get out of the weeds and start focusing on the bigger picture – all while improving the value of their business and their quality of life. Fractional CFOs can be a valuable resource in this process, providing the financial expertise and strategic guidance needed to build a strong team and delegate responsibilities effectively. 

False Perception  

Many owners don’t understand the process of exit planning or how it can benefit them.  

For instance, some believe that the exit planning process should begin six months to a year prior to selling the business. Others believe that their businesses’ strong financial results preclude the need to exit plan, which ignores one of the harshest realities of selling a business: “Only 20% of businesses that are listed for sale actually sell,” Cherry said. “So, there is a significant failure rate.”  

Still others believe that exit planning isn’t necessary if they plan to transfer the business to a child or other relative. However, this, too, does not consider important issues such as the long-term financial security of the owner, nor does it consider how the owner’s role must evolve to prepare for transition.  

Overconfidence  

Overconfidence often comes from a lack of information, Cherry said. The owner will gauge his or her potential for success based on how much a friend’s business sold for. Or, the owner may think that, because he or she has received passive interest from potential buyers, that an eventual sale is essentially in the bag.  

This often stems from the tendency to think of selling a business like selling a house, Cherry explained. However, the process is more like preparing a high school football player to play in the NFL.  

“The body and mindset of the high school player have to be developed to be able to function at an exponentially higher level,” Cherry said. “There’s a great deal of work to do, and you can’t just do it overnight.”  

Emotional  

There are often many emotions tied up in the process of owning and running a business, Cherry said. That makes even the thought of doing something different a particularly scary one.  

“Many business owners will say, ‘My world revolves around my business, and I haven’t given any thought to what I’m going to do after it,’” Cherry said. “And anytime these owners do give it thought, it comes with worry because they don’t know if they have enough wealth to retire.”  

Avoidance  

This is the ostrich mentality – the idea that if owners stick their heads in the sand and don’t think about exit planning, it will just go away.  

Exit planning is most effective when we take a proactive approach. This sets business owners up for optimal success, no matter what their next chapter brings.  

How to Remove the ‘Wall of Resistance’ to Exit Planning  

Understanding the reasons owners may be avoiding the exit planning process is critical to helping them embrace it and reap the most benefits for their businesses. Here are some approaches Cherry recommends removing what he refers to as the “wall of resistance” to the exit planning process.  

Align planning with personal aspirations: Connect exit planning to the owner’s dreams for life after the business, such as retirement, travel, or new ventures. 

• Approach: "Planning today ensures you’ll have the time and resources to enjoy the life you’ve been working so hard for." 

• Action: Ask the owner to describe their ideal future, then map the planning process to those aspirations. 

Focus on financial security: Emphasize how exit planning ensures owners have the wealth they need to sustain their desired lifestyle. 

• Approach: "A well-planned exit guarantees you’ll have the financial independence to live your life on your terms." 

• Action: Develop a financial projection showing how planning impacts their wealth goals. 

Focus on preserving their legacy: Show how planning helps protect the business’s legacy, ensuring it continues to thrive under new leadership. 

• Approach: "You’ve built something amazing. Let’s ensure it continues to grow and make an impact, even after you step away." 

• Action: Discuss strategies to preserve the business’s culture and mission during the transition. 

Present a vision of freedom: Help owners imagine a life free from the day-to-day responsibilities of running their business. For many, running their business has been their life’s purpose, so how can we reframe a potential exit as an opportunity to capitalize on what Cherry refers to as their “purpose-driven payday”?  

• Approach: "Imagine being able to enjoy life without the constant stress of managing the business." 

• Action: Illustrate how delegating responsibilities and systematizing operations can prepare them for a smoother transition. 

Visualize the next chapter: Help the owner envision what they’ll do after the business, such as starting a new venture, mentoring others, or pursuing a passion. 

• Approach: "Planning now ensures you can transition to the next chapter, whatever that may look like for you." 

• Action: Create a timeline outlining milestones for transitioning to their post-business goals and encourage experimentation. If the owner eventually wants to teach, have them try teaching a section of a course at a local college. If they want to mentor, find ways to connect them with up-and-coming businesses.  

Emphasize family benefits: Highlight how planning creates stability and financial security for their family. 

• Approach: "Exit planning is about securing not just your future, but your family’s as well." 

• Action: Incorporate family wealth management or the succession planning process into the discussion to ensure financial security for the generations to come. 

Address emotional fulfillment: Focus on how exit planning allows the owner to achieve personal satisfaction by fulfilling long-held goals. 

• Approach: "This is your chance to focus on what truly fulfills you while knowing your business is in good hands." 

• Action: Encourage them to create a "dream list" of things they’ve always wanted to do. Help them determine ways to fill the void of business ownership.  

Reduce fear of the unknown: Show how planning removes uncertainty and gives them confidence about the future. 

• Approach: "If you haven’t started exit planning yet, you are not alone. And starting now will help you move forward with clarity, knowing you’ve covered all the bases." 

• Action: Break the process into manageable phases to reduce overwhelm. 

Showcase the value to employees and customers: Help owners see how planning benefits the people who rely on their business. 

• Approach: "A planned transition ensures your employees and customers remain well-supported, preserving your business’s impact." 

• Action: Include succession and continuity planning in the exit strategy. 

As exit planning advisors, we do not have to use all the above strategies to combat resistance and encourage business owners to engage in the process. Instead, choose your approach based on the concerns and needs of the owner, Cherry said. And remember: Be patient. “Business owners are very proud people, and they didn’t come to their resistance lightly,” he said. “They are pretty fortified in it, so we have to chip away with the same rigor they used to develop it.”  

Embedded CEPAs: A Long-Term Approach to Breaking Down Walls 

Overcoming business owners' resistance to exit planning requires more than just short-term interventions. While traditional CEPAs often focus on specific transactional aspects, FocusCFO takes a longer-term, more integrated approach. Our fractional CFOs act as ‘embedded CEPAs’, working with business owners over extended periods – typically 3-7 years – to build sustainable, transferable value. This allows us to proactively address the underlying issues that contribute to exit planning avoidance, fostering a deeper understanding of the process and building trust over time. By becoming a trusted, consistent partner, we can effectively break down these walls of resistance and guide owners toward a more secure and fulfilling future. 

As Strategic Partners of EPI, at FocusCFO we understand the intricacies of this process. Our fractional CFOs bring a wealth of experience in helping businesses address the very challenges that often lead to exit planning avoidance – from improving financial performance to reducing owner dependency. We would welcome the opportunity to connect with you and explore how we can partner together to work for the mutual benefit of our clients. We invite you to develop a relationship with a FocusCFO Area President in your local market, learn more. 

FocusCFO specializes in providing fractional CFO services to small and midsized businesses across the U.S., whether they are looking to increase the value of their business now or in the lead up to an exit. If you’re interested in learning how we could support your business, schedule a consult today!    

Darren Cherry is an industry-leading exit advisor, C-level executive, and entrepreneur with a 35+ year track record of growing, scaling, buying, and selling businesses. He currently serves as an area president for FocusCFO serving the Columbus metro area.