How Every Generation Approaches Exit Planning (and Who They Trust Most)

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Key Takeaways

• Generational differences shape how business owners approach exit planning, but all generations share a desire for security, legacy, and business continuity.
• Baby Boomers, Gen X, and Millennials prioritize different aspects of the exit planning process, from wealth preservation to innovation and social impact.
• The value and legacy of a business are directly influenced by the timing, structure, and thoroughness of exit planning.
• Trusted advisors especially accountants, attorneys, and financial planners play a pivotal role in guiding owners through complex exit strategies.
• Building a diverse, multi-disciplinary exit team is essential for maximizing value and ensuring a smooth transition, regardless of the owner’s generation.

Why Generational Perspective Matters in Exit Planning

Exit planning is a critical process for business owners, involving the preparation and execution of strategies to transition ownership, maximize value, and secure personal and family goals. However, the approach to exit planning is not one-size-fits-all. Each generation, including Baby Boomers, Gen X, and Millennials, brings unique perspectives, priorities, and challenges to the table.

Baby Boomers, who own a significant portion of privately held businesses in the United States, are often motivated by retirement readiness and wealth transfer. Their exit planning is typically driven by a desire to preserve the business’s legacy and ensure financial security for themselves and their families.

Gen X business owners, now in their prime earning years, tend to balance risk management with growth opportunities. They are often more open to innovative exit strategies, such as employee stock ownership plans (ESOPs) or private equity sales, and are keenly aware of the need for flexibility in a rapidly changing economic landscape.

Millennials, the newest generation of business owners, are digital natives who value agility, social responsibility, and work-life balance. Their approach to exit planning often incorporates considerations of social impact, sustainability, and the use of technology to streamline the process.

Understanding these generational perspectives is crucial for advisors and stakeholders involved in the exit planning process. It allows for tailored strategies that align with the owner’s values, goals, and vision for the future of the business.

Shared Priorities Across Baby Boomers, Gen X, and Millennials

Despite generational differences, there are several shared priorities that unite business owners when it comes to exit planning:

1. Maximizing Business Value: All generations seek to enhance the value of their business prior to exit, whether through operational improvements, strategic growth, or tax-efficient structuring.
2. Ensuring Continuity: Owners want to ensure that the business continues to thrive after their departure, whether it remains family-owned, is sold to employees, or transitions to new investors.
3. Protecting Family and Employees: The welfare of family members and loyal employees is a common concern, influencing decisions about succession, compensation, and benefits.
4. Minimizing Tax Liability: Effective exit planning includes strategies to reduce capital gains, estate, and income taxes, leveraging tools such as qualified small business stock (QSBS) exclusions, ESOPs, and trusts.
5. Preserving Legacy: Owners across generations are motivated by the desire to leave a positive legacy, whether that means maintaining the company’s culture, supporting charitable causes, or contributing to the community.

These shared priorities underscore the importance of a comprehensive, well-structured exit plan that addresses both financial and non-financial objectives.

The Impact of Exit Planning on Business Value and Legacy

The timing and quality of exit planning have a profound impact on both the value of the business and the legacy left by the owner. According to exit planning statistics, a significant number of business owners delay planning until a triggering event such as an illness, market downturn, or unsolicited offer that forces their hand. This reactive approach often results in suboptimal outcomes, including lower sale prices, higher taxes, and disrupted operations.

Proactive exit planning, on the other hand, allows owners to:

• Optimize Business Operations: By identifying and addressing weaknesses, streamlining processes, and investing in growth, owners can increase the attractiveness and value of their business to potential buyers or successors.
• Implement Tax-Efficient Strategies: Early planning enables the use of advanced tax planning tools, such as gifting QSBS to non-grantor trusts to maximize the Section 1202 exclusion, or structuring sales to ESOPs under Section 1042 to defer capital gains taxes.
• Facilitate Smooth Transitions: A well-documented and communicated exit plan reduces uncertainty, maintains employee morale, and ensures continuity of leadership and vision.
• Preserve Family Harmony: For family-owned businesses, clear succession planning helps prevent disputes and aligns expectations among heirs and stakeholders.

Ultimately, the legacy of a business owner is shaped not just by the success of the business, but by the care and foresight invested in its transition.

Who Do Business Owners Trust Most as Advisors?

The complexity of business exit planning requires input from a range of professionals. But who do business owners trust most when it comes to guiding them through this critical process?

Accountants are often the most trusted advisors, given their deep understanding of the business’s financials, tax situation, and long-term goals. Their expertise is invaluable in structuring transactions, modeling tax implications, and ensuring compliance with relevant laws and regulations.

Attorneys play a crucial role in drafting and reviewing legal documents, negotiating terms, and addressing issues related to ownership, liability, and succession.

Financial Planners and Wealth Advisors help owners align their exit strategy with personal financial goals, retirement planning, and estate considerations.

Business Brokers and M&A Advisors provide market insights, identify potential buyers, and manage the sale process to maximize value.

Non-family advisors including independent board members, consultants, and industry experts, bring objectivity and specialized knowledge, helping owners navigate emotional and strategic challenges.

Trust is built over time, often through years of collaboration and demonstrated expertise. Owners tend to rely most heavily on advisors who understand their business, share their values, and communicate clearly and honestly.

Building an Effective Exit Team: Lessons for Every Generation

Regardless of age or experience, every business owner can benefit from assembling a diverse and effective exit planning team. Here are some key lessons for building a team that delivers results:

1. Start Early: The best exit planning begins years before the anticipated transition. Early engagement allows for more options, better tax outcomes, and a smoother process.
2. Leverage Multi-Disciplinary Expertise: No single advisor can address all aspects of exit planning. A team that includes accountants, attorneys, financial planners, and industry specialists ensures comprehensive coverage.
3. Prioritize Communication: Regular, transparent communication among team members and with the owner is essential for aligning strategies and avoiding misunderstandings.
4. Customize the Plan: Each business and owner is unique. The exit plan should reflect the owner’s goals, values, and circumstances, rather than relying on generic templates.
5. Review and Update Regularly: The business environment, tax laws, and personal circumstances change over time. Regular reviews ensure that the exit plan remains relevant and effective.
6. Address Emotional and Family Dynamics: Exit planning is not just a financial exercise. Advisors should be sensitive to the emotional and relational aspects, especially in family businesses.
7. Educate and Empower Successors: Whether the business is transitioning to family, employees, or outside buyers, investing in leadership development and knowledge transfer is critical for long-term success.

By following these lessons, business owners can maximize value, minimize risk, and achieve a successful transition that honors their legacy.

FAQs

Can younger business owners benefit from early exit planning?

Absolutely. Early exit planning is not just for those nearing retirement. Younger business owners, including Millennials, can use exit planning to clarify long-term goals, attract investors, and build a more resilient business. Early planning also allows for the implementation of tax-efficient strategies, such as qualifying for the Section 1202 exclusion on qualified small business stock (QSBS), which requires a five-year holding period [1]. By starting early, owners can maximize flexibility and value when the time comes to exit.

How does having a trusted accountant make a difference?

A trusted accountant is central to exit planning. They provide critical insights into the business’s financial health, help structure transactions to minimize taxes, and ensure compliance with complex regulations. For example, accountants can advise on the use of ESOPs under Section 1042 to defer capital gains, or on gifting strategies to leverage the QSBS exclusion [2]. Their expertise can mean the difference between a successful, tax-efficient exit and costly mistakes.

What is the role of non-family advisors in modern exit strategies?

Non-family advisors bring objectivity, specialized knowledge, and a fresh perspective to planning and preparing for a business transition. They can help navigate complex family dynamics, challenge assumptions, and introduce innovative strategies that family members may overlook. Their involvement is especially valuable when family members have conflicting interests or lack the expertise needed to successfully guide the business through a change in ownership.

How often should an exit strategy be reviewed or updated?

An exit strategy should be reviewed at least annually, and more frequently if there are significant changes in the business, tax laws, or personal circumstances. Regular reviews ensure that the plan remains aligned with the owner’s goals and adapts to new opportunities or risks. For example, changes in tax law such as updates to the Section 1202 exclusion or the introduction of new surcharges on trusts can have a major impact on the optimal exit strategy. Ongoing collaboration with advisors is essential for keeping the plan current and effective.

Conclusion

Exit planning for business owners is a complex, multi-faceted process that requires foresight, expertise, and collaboration. While each generation brings its own perspective and priorities, the fundamentals of maximizing value, ensuring continuity, and preserving legacy remain constant. By understanding generational differences, leveraging trusted advisors, and building a strong exit team, business owners can navigate the process of exit planning with confidence and achieve outcomes that honor their hard work and vision for the future.

Bennett Thrasher’s experienced advisors work closely with business owners at every stage to develop tailored strategies that align with their goals, values, and long-term vision. Our multi-disciplinary team combines deep industry knowledge with proven planning tools to help you maximize business value, minimize tax exposure, and ensure a smooth ownership transition. Contact us today to start building a strategy that positions your business for long-term success.

Gina Miller
Bennett Thrasher LLP
Phone: (770) 396-2200

Cited sources :

[1] 26 USC 1202: Partial exclusion for gain from certain small business stock

[2] Use of ESOPs under Section 1042 to defer capital gains,

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