Owner Transition & Exit Planning

Exit readiness assessment, strategy comparison, succession planning, and value gap analysis

Exit Readiness Score
$6.2M
Current Valuation
$8.5M
Target Valuation
$2.3M
Value Gap
24 mo
Target Timeline
High
Owner Dependency
65%
Succession Ready
Owner Dependency Analysis
Exit Strategy Comparison
Strategic Sale
Best Match

Sell to an industry buyer who sees strategic value.

Pros:
  • Highest valuation premium
  • Clean exit
  • Synergy-driven pricing
Cons:
  • Employee uncertainty
  • Longer process (6-12 mo)
  • Cultural integration risk
Private Equity
Strong Option

Partner with PE firm for partial or full liquidity.

Pros:
  • Retain minority stake
  • Professional management
  • Growth capital available
Cons:
  • Financial engineering focus
  • 5-7 year hold period
  • Aggressive targets
Management Buyout
Viable

Existing management team purchases the business.

Pros:
  • Business continuity
  • Team knows operations
  • Flexible deal terms
Cons:
  • Lower purchase price
  • Seller financing often needed
  • Management funding gap
ESOP
Consider

Employee Stock Ownership Plan for gradual transition.

Pros:
  • Tax advantages (S-corp)
  • Employee retention
  • Legacy preservation
Cons:
  • Complex setup ($50-100K)
  • Ongoing admin costs
  • Repurchase obligation
Family Transfer
Situational

Transfer ownership to family members over time.

Pros:
  • Legacy continuity
  • Gradual transition
  • Estate planning benefits
Cons:
  • Family dynamics risk
  • Competency concerns
  • Gift/estate tax issues
Merger
Explore

Combine with a complementary business for shared equity.

Pros:
  • Shared risk/reward
  • Scale advantages
  • Retain involvement
Cons:
  • Culture clash risk
  • Shared decision-making
  • Delayed full exit
Succession Planning Matrix
Key RoleCurrentSuccessorReadinessGapTimeline
CEO / OwnerJohn SmithSarah Johnson (COO)
65%		 Strategic vision, investor relations 18 months
VP SalesOwner (Direct)Mike Chen (Sales Mgr)
50%		 Key account relationships, pricing authority 12 months
CFOOutsourcedLisa Park (Controller)
80%		 Strategic finance, board reporting 6 months
CTOAlex RiveraDev Lead (internal)
75%		 Architecture decisions, vendor mgmt 9 months
VP OperationsSarah JohnsonOps Manager (internal)
55%		 Vendor negotiation, hiring decisions 12 months
Value Gap Analysis - Bridge to Target
Tax Considerations (Informational)
Disclaimer: This information is for educational purposes only and does not constitute tax advice. Consult with a qualified tax professional for your specific situation.
Capital Gains
  • Long-term capital gains rate: 0-20%
  • Net Investment Income Tax: +3.8%
  • State income tax varies
  • Qualified Small Business Stock (QSBS) exclusion may apply
Structure Impact
  • Asset sale: Ordinary income on depreciation recapture
  • Stock sale: Preferential capital gains treatment
  • Installment sale: Spread tax over payment period
  • ESOP: Tax deferral under Section 1042
Planning Opportunities
  • Opportunity Zone reinvestment
  • Charitable Remainder Trust (CRT)
  • Installment sales to IDGTs
  • Pre-sale gift strategies
Estimated Tax Impact
Federal Capital Gains$930K - $1.24M
State Tax (est.)$186K - $310K
Net Investment Tax$178K - $236K
Total Estimated Tax$1.3M - $1.8M
Net After-Tax Proceeds$4.4M - $5.7M
Transition Timeline
Phase 1: Preparation
Months 1-6
  • Financial clean-up & audit
  • Document all SOPs
  • Begin management training
  • Engage M&A advisor
Phase 2: Value Building
Months 6-12
  • Reduce owner dependency
  • Grow recurring revenue
  • Strengthen management team
  • Optimize operations
Phase 3: Go-to-Market
Months 12-18
  • Prepare CIM (Confidential Info Memo)
  • Identify & approach buyers
  • Manage due diligence
  • Negotiate LOI & terms
Phase 4: Close & Transition
Months 18-24
  • Final negotiations & close
  • Transition period (90-180 days)
  • Knowledge transfer
  • Post-close support
Readiness Breakdown
Financial Readiness82/100
Operational Independence55/100
Management Depth65/100
Documentation & SOPs60/100
Legal / Compliance78/100
Customer Concentration85/100
Priority Actions
1
Reduce Owner Dependency

Transfer top 5 client relationships to sales manager within 6 months.

2
Hire / Promote #2 Leader

Elevate COO to run day-to-day operations independently.

3
Complete SOP Documentation

Document remaining 40% of key processes and procedures.

4
Engage Tax Advisor

Begin tax planning 18-24 months before target exit date.

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