More than 50% of business owners will reach the age of retirement in the next ten years.

Yet nearly two-thirds of family businesses don’t have a documented succession plan, and experts estimate that only 30% of businesses successfully sell.

That’s a lot of uncertainty for someone who’s worked hard to build something lasting. But here’s the good news: a little planning now can clear up that uncertainty and turn “someday” into a strategy.

Whether retirement is one year or 10 years away, understanding your exit options can help you secure a healthy nest egg, preserve your legacy, and support the employees who helped you build your business. Let’s talk about how to make that happen.

The importance of exit planning for business owners nearing retirement

Running a business comes with enough surprises—retirement shouldn’t be one of them. Whether you’re thinking about selling, passing the torch, or just stepping back, an exit plan helps make sure the business you built keeps working for you.

It’s more than picking a date and hoping for the best. Exit planning ties into everything: how you structure leadership, handle taxes, protect assets, and set up contracts.

It answers questions like:

• What’s your business worth? (Not what you think it’s worth, but what a buyer would pay.)
• Who takes over, and how do they get the support they need to succeed?
• How can you sell or transfer ownership without handing half to the IRS?
• What happens if something happens (e.g., an unexpected health issue, a market shift, or an offer you didn’t see coming) before your target retirement?

These aren’t future problems. They are decisions that shape the business now—how you grow, hire, and invest. Waiting until retirement’s around the corner only limits your options.

Five exit strategies for business owners to consider

To start planning your exit strategy, here are five common routes to consider based on your needs and goals for yourself and your business.

1. Family succession

Passing a business to family can be a meaningful way to preserve your legacy—just without the HBO-level drama (hopefully).

If done right, it preserves the company’s values while giving the next generation a head start. However, even the smoothest transitions can create tension, especially if expectations are unclear or if the heir-apparent is not fully prepared for the role. 

There are also the not-so-small matters of taxes, ownership structures, and ensuring that non-family employees don’t feel like they’re suddenly extras in someone else’s story.

If you’re thinking about this model for your exit strategy, ask yourself these questions:

• Is your successor equipped to run the business, and do they want to?
• How will the transfer affect your estate plan and potential gift tax exposure?
• Will existing employees and clients stick around through the change?

Family succession works best when treated like a business decision, not just a personal one. Bringing in trusted legal counsel can help you determine whether this is the right move for your business and its implications for your estate plan.

2. Merger or acquisition

Merging your business or being acquired by another company can be a profitable exit strategy that protects your employees and expands market reach. However, M&A deals can be incredibly complicated and variable.

The upside? Competitive bidding can increase the sale price, especially if multiple buyers are interested. Depending on the deal, you might retain partial ownership or a leadership role during the transition.

The challenges? M&A takes time, money, and stamina. Deals can stall or fall apart entirely. Even successful sales often lead to restructuring, affecting employees and the company culture you’ve built. Tax implications are another key factor. Capital gains taxes often apply, depending on how the sale is structured.

Because of the stakes involved, working closely with your attorney is vital. They can help structure the sale to protect your interests, address capital gains tax issues, and ensure the terms match your goals.

3. Employee stock ownership plan

An employee stock ownership plan (ESOP) allows business owners to sell part or all of their business to their employees.

This approach brings some attractive tax advantages. ESOPs can provide significant tax benefits, including potential deferral of capital gains taxes for the selling owner and tax deductions for the company’s contributions to the ESOP.

An ESOP typically maintains a company’s existing structure and workforce, which empowers your employees to uphold the company’s mission and vision.

Remember that an ESOP can only be used if a company has more than 15 employees and reaches a certain earnings threshold known as an EBITDA (earnings before interest, taxes, depreciation, and amortization).

If you are considering an ESOP, give yourself plenty of time to plan. These exit strategies typically take over six months to plan and execute well.

4. Selling to a third party or co-owner

Selling your business to a third party or co-owner can be the best option for business owners looking for immediate liquidity, especially if retirement is imminent.

While this option can provide a clean break, the process often involves detailed audits, complex negotiations, and careful deal structuring. Whether you’re selling to an individual, another business, or a private equity firm, buyers will scrutinize not just past success but future potential. Strong financials, documented processes, and a clear growth path can significantly impact the final sale price.

How the sale is structured also matters.

Asset sales, stock sales, and installment payments carry different tax implications and risks. Will you stay involved during a transition period or exit immediately? These decisions shape both your payout and your post-sale obligations.

5. Initial public offering

An initial public offering (IPO) involves selling your business to the public via shares on a stock exchange. When done well, it can be an incredibly profitable exit strategy, but there are plenty of caveats along the way.

An IPO can be a great option for a successful business with a private valuation upwards of $1 billion and when the owner has several years to plan their exit strategy. It can also allow owners to maintain partial control of their company while continuing to profit from share values for years to come.

Substantial regulatory requirements, scrutiny by the Securities and Exchange Commission, and public interest in the business are potential roadblocks to an IPO.

Secure the future of your business with guidance from a business succession planning lawyer 

Many business owners have spent years and decades building up their businesses and, above all, should be proud of their accomplishments.

A business succession planning lawyer, like the attorneys at the Law Offices of Shann M. Chaudhry, ESQ., can help you pursue an exit strategy that reaches your personal, professional, and financial goals while honoring your legacy.

Contact our offices today to schedule a consultation.