For many entrepreneurs, selling a company is a long-awaited goal. For others, this happens suddenly due to circumstances beyond their control. However it happens, a business exit is one of the most significant financial and personal changes an owner will ever experience. But most people go in unprepared.
According to the Exit Planning Institute, only 20 to 30% of companies that go public actually sell. Why? Too often, owners focus on the final price and overlook contract terms, valuation, taxes and personal priorities that ultimately determine whether a sale is truly successful. These failures are not only financial, but also emotional, strategic and personal.
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Understanding these blind spots can help owners plan an exit that balances economics, risk and control based on their true priorities. Here are six of the most common exit planning gaps—and how to avoid them.
1. Chasing the big number
Many entrepreneurs focus on the top prize, but the highest offer is not always the best offer. The fine print, from contingent liabilities and payout terms to risk allocations and even who takes over, can outweigh the overall offering.
A larger number may come with an earn-out period that extends for years or with conditions that limit an owner's next move. In some cases, sellers are happier with a lower sales price that offers more security, more control, and a buyer whose values align with their own.
2. Misjudging the business value
Years of commitment can lead owners to see value in their companies that reflects emotion, commitment and legacy – but not necessarily what the market is willing to pay. However, buyers weigh risk factors such as customer concentration, founder dependence and gaps in financial reporting – as well as profitability, revenue quality, leadership depth and industry prospects.
Owners who skip appraisals each year may be surprised when the final number comes in lower than expected. Treating a business like a house that might one day be sold (always in market-ready condition) makes it easier to seize opportunities as they arise.
By benchmarking against similar transactions and following industry trends, expectations remain realistic and opportunities visible. Regular, independent reviews keep expectations down and reveal what really adds value.
3. Overestimating the payout
A total sale price of $100 million may sound transformative – but it doesn't equate to the amount the owner takes home. After taxes, fees, debt repayment and terms and conditions, the net payout may fall short of lifestyle, family obligations or planned charitable plans.
Taxes in particular can be a shock. There is no magic pill to avoid them; just smart strategies to overcome them. Working closely with advisors to run through real-world scenarios before closing the deal can help determine whether it's better to sell now or wait.
Understanding true net proceeds is the clearest measure of whether a deal supports the next chapter.
4. Ignore personal planning
Without early planning, the proceeds may look impressive on paper, but are not enough to provide the life the owner envisioned, from supporting children and aging parents to maintaining a certain standard of living. These priorities should guide both timing and strategy.
One way to bridge this gap is to assemble a personal “board of directors”—a financial advisor, an accountant, a lawyer, and other trusted professionals, each looking at the business from a unique perspective.
When there are more perspectives, something important is less likely to be missed. When advisors are collaborative, communicative, and open-minded, their combined perspective can help keep the big picture in mind and ensure decisions are consistent with long-term goals.
5. Not planning the next chapter
When overwhelmed by the day-to-day demands of running a business, it can be difficult to step back and plan life around it, often leaving owners experiencing an unexpected void. Those who take the time to plan in advance – setting up a foundation, mentoring entrepreneurs, traveling or starting a new business – will make the transition go more smoothly.
Emotional preparation is just as important as financial preparation because change can be profound. Providing resources, from financial advisors to executive coaches, makes adjustment easier.
6. Start late
Even if there are no plans to sell, an exit plan prepares owners for the unexpected: an untimely death, an unsolicited offer, a partner's decision, or a market change.
Anyone planning a sale should start refining financials, strengthening operations and increasing shareholder value two to three years in advance. Early preparation also creates the flexibility to address other gaps before they become obstacles.
Time is what variable owners cannot buy back.
When should the exit plan be reconsidered?
An exit plan should be developed in parallel with business and personal life. Changes in ownership, periods of rapid growth, market conditions, leadership departures, or major life events are all signals to reconsider financial status, schedule, and personal goals.
Thoughtful exit planning bridges the gap between the deal on paper and life after the sale. With the support of a collaborative, trusted team of advisors, owners can protect their lifestyle needs, honor years of hard work, and move into the next chapter with confidence and clarity.
Author: Christy Ray is a principal and private wealth advisor at BMO Wealth Management, where she assists Arizona business owners with integrated wealth strategies. “BMO Wealth Management” is a brand name that refers to BMO Bank NA and certain of its affiliates that provide certain investment, investment advisory, trust, banking and securities products and services. Investment products and services include: No deposit – not insured by the FDIC or any federal agency – not guaranteed by a bank – may lose value. This information will be used to promote or market the planning strategies discussed herein. This information does not constitute legal or tax advice for taxpayers and should not be relied upon as such. BMO Bank NA and its affiliates do not provide legal or tax advice to their customers. You should discuss your circumstances with your independent legal and tax advisors.