Three Legs, One Wobbly: Exit Planning So You Don't Regret Selling

You need a destination, not just a departure. Structure, how do you spend your days? Not in general, actual Tuesday, 10 a.m., what are you doing? I've watched golfing, right? Well, golfing and drinking at the bar is not an option. It's not a retirement plan, according to my wife, right? I've watched owners go from 60-hour weeks to what do I do with Tuesday in less than a month.

Relationships, most of your closest relationships probably exist inside the business. Employees, clients, vendors, the same coffee shop three times a week. Post exit, that world shrinks overnight. If you haven't invested in relationships outside the company, the silence is deafening. Story, it's a real one, composite name, real pattern, the whole shebang. Owner sold a clean $8 million exit at 68, sat at home for six months, then bought a smaller, worse business in the same industry, just to have something to do.

Now, he's 70 years old, running a job he doesn't need because he didn't plan leg two. This isn't therapy talk. This is the leg where 75% of exits die. It's the most important business problem in the room. It just doesn't look like one because nobody bills for it. Okay, before we jump into that important third leg, let's take a quick break. This episode is brought to you by Upstate Doors.

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All right, that all-important third leg, the third leg that we all want, the wealth plan, walk me through it. Some of us have it. Almost every owner's net worth is trapped inside the business, right? House, 401K, savings. Those are honestly rounding errors next to the enterprise value. So the wealth plan is the answer to one question. When this thing turns into a check, what does that check do?

After tax math first, the headline number is growth. You got federal tax, state tax, transaction costs, advisor fees, escrow holdbacks, earn out structures, contingent payments. The net is often 25 to 40% below the headline. You should know that number before you sign an LOI, not after. Then, what does the net fund? Lifestyle, philanthropy, the next venture, family wealth transfer, the years-long boat you've been threatening to buy for a decade?

Then, how does it stay alive? Investments? How is your risk tolerance now that you're not a private business owner with consistent cash flow? Most owners overrate risk after exit because they made their money taking it. The math on the other side is different. You made your money taking risk. You keep it by not taking it. Presale tax planning is the most expensive leg to ignore.

Entity restructuring, basis tracking, charitable strategies, trust structures, QSBS if it applies to you. These take years to set up and produce six and seven figure savings at the closing table. Six months out is too late. Two years out is the minimum. Five years is even better. I've watched owners save more on the tax leg of the exit than they made in the last three years of running the business.

They started planning early. I've also watched owners pay full freight because they started tax planning the week the LOI showed up. It's way too late. That was a seven figure Tuesday. Holy smokes. That's why we always say begin with the end in mind. You got that right. It's a great saying. Don't know who came up with that. I'm really handsome dude with a third leg. He's good.

Moving swiftly on. Okay, owners listening. How do they figure out which leg of theirs is the wobbly one? So you gotta be honest when you score, right? One to 10 on each leg, yourself first, then with someone who will tell you the truth, right? Not your accountant, not your team, someone with no financial interest in the answer. Okay, leg one signals. Books close in over 15 business days.

Your ODI or your owner discretionary index above seven. It's a callback to episode nine, you are the bottleneck. Customer concentration above 20%, we're talking cousin Vinny again. No 13-week cash forecast, no documented core processes. Any of those, leg one is short. Leg two signals. You panic at two weeks without checking email. You can't describe a normal Tuesday post exit. Your closest friends are all your employees, customers or vendors.

You're in your 50s or 60s with no answer to what's next. Leg three signals. You don't know your after-tax exit number. You haven't talked to an estate or tax planner in two years. Your entity is the same one you set up in year one. You haven't met with a wealth advisor about post exit cash flow. Score each leg honestly. Whichever is lowest is the one that gives out under load.

Most owners are an eight, a four, and a three. They've engineered the business to be sellable. They have no idea who they are after, and they have no plan for the money. Eight, four, three is the average owner. If those numbers describe you, welcome to the club. It's a big club. It's also the club that produces the 75% regret rate. Right. I think I know how I can spend the money.

That's for sure. How long will it last is the question. That's true. Well, it depends on how expensive the golf club is. Yeah. Or how many you go to. Yeah. True. So owners are going to say, right, I'll fix leg one first and I'll deal with the rest later. What does it cost them? The cost of ignoring leg two is regret. Real, expensive, lasting regret.

The 75% statistic. Buyer's remorse. Selling and trying to buy back. Selling and going quiet for six months. Selling and starting a worse, smaller version of the same business 18 months later because you can't sit still and nobody told you what to do without the sitting. Cost of ignoring leg three is dollars. Often a lot of them. Suboptimal tax structure at sale, that's 5 to 15% of the deal. Loss of taxes you could have legally avoided.

On a $10 million exit, Jon, that's $500,000 to $1.5 million that you gave to Uncle Sam for no reason whatsoever. Left on the table, on purpose, because you didn't plan. Wrong post sale investment posture, right? Market correction wipes out 20% of your proceeds in year one of things that you couldn't control because nobody rebalanced you from private business owner risk to preservation. You don't have an estate plan, no trust structures, no charitable strategies.

The IRS gets a check that should have gone to your kids or your foundation. And the IRS never sends a thank you note, but they'll send a collections agency after you, right? Leg one mistakes cost you a turn of EBITDA. Leg three mistakes cost you a third of the proceeds. Leg two mistakes cost you the version of yourself you are supposed to become. If you can only run one leg per year, run them in this order.

Leg one first, year one, leg three second, year two, and leg two third, year three. Not because leg two matters least, it's because it takes the longest and needs the runway. Three years of legs or one year of exit and 20 years of regret. Pick one. All right, quick break, Jon. This episode has been the most emotionally serious one in a while. It has, I'm holding back my post-exit plan.

Which is? Play-by-play announcing for the beer league hockey team in my town. I will not be explaining the math, that's my one. That's your one. My one. Brought to you by Upstate Doors, new garage door installations across the North Country, and here's my honest pitch. Replacing a beat up garage door does more for curb appeal than almost anything else you'll spend the money on. It's the largest single visual element on the front of most houses.

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Inflation. Yeah, that's right. Alrighty, back to our program. How early does an owner need to start on all three legs? Earlier than feels reasonable. To be honest with you, seven to 10 years before you want to exit. Wow. I know. Mostly our owners hear that and they're going to mentally file it under, well, someday, right? Then they call me eight months before the LOI drops. Why earlier matters, I'll tell you this by leg.

Leg one. Get rid of your — you have customer diversification. You have a leadership bench, documented processes, recurring revenue. These take three to seven years to mature. You cannot manufacture them in a quarter. Leg two, identity and purpose work take years. You cannot decide what you'll do post exit in a weekend. You need to test it. Board seat, side project, volunteer role. See what fits before you bet your whole calendar on it.

And three, tax planning takes three to five years minimum to optimize. Entity restructuring, basis cleanup, trust setup, charitable lead trust, none of these work as a fire drill. Minimum viable start is three years. Under three, you're triaging. You're not planning. That's fine. Sometimes triage is what you have, but name it honestly. Exit lens inside your SOS rhythm, 30 minutes every quarter on a single question. Did anything this quarter move our exit readiness score across all three legs? 30 seconds in every weekly L10. Did anything this week move a value driver? Make it a routine, not radical.

The compounding does the work. So just to repeat back, legs two and three take the same amount of time as leg one, as building the business and getting it ready. Two and three take just as much time. They certainly do. What do you want to do with your life afterwards, right? It takes time to figure that out, Jon, and to get your plan in place. People need more hobbies.

They do. Exiting should be a hobby. Yeah. And I can tie all the flies that I want, fly fishing. There you go. Fly fishing and golf. So okay, who quarterbacks all of this? Who's actually running it? How do people get through all of this? So there's usually four professionals, none of them work alone. And that's usually the mistake people make, right? Leg one quarterback, your CFO or fractional CFO and your integrator.

Operational and financial readiness, data room, scorecard, capacity model, customer concentration report, they get you. Leg two quarterback, you with help. Sometimes a coach, sometimes a therapist, sometimes a peer group, sometimes all three. This is the leg nobody builds for, which is why nobody works on it. Leg three has two heads. A tax-aware planner or tax strategist on your planning side could be an enrolled agent or CPA, and your wealth advisor on the post-exit deployment side. And if we're counting a fifth one, ideally an estate attorney for the structures. The conductor on top is a CEPA certified exit planner or an M&A advisor with exit planning chops. Somebody whose job is to make sure all four professionals are talking to each other, not in silos, and not just to you. Because here's what happens without a conductor. Your CPA optimizes last year's tax bill. Your wealth advisor optimizes for assets under management. Your attorney optimizes for billable hours.

And your CFO optimizes for the next board meeting. Nobody is optimizing for the integrated exit. That's what the conductor does. That's the seat you need to fill. Most owners don't fill it until they're 90 days from a closing they can't undo, which is exactly when a conductor can't help you anymore. If you can only hire one of them, hire the conductor. They build the team around themselves, more importantly, around you.

Awesome, important. Last break, Upstate Doors. And this one is for the commercial audience because that's the piece owners forget. Warehouse doors, loading bays, shop doors on a light industrial building. You upgrade the office and forget the back of the building. Looks like it lost a fight in 1998. This matters at exit. A buyer walks the property, front of the building is fine. They walk around the back, the commercial doors are rusted, the seals are shot, one of them doesn't close all the way.

That's a walking price cut, that's a walking mullet. Upstate does full commercial installations, new builds, retrofits, roll up doors, same CHI and Raynor quality on the commercial side. And I'll admit, I owned a commercial building for eight years and never once thought about the doors as a value driver. Yeah, you used to have a mullet as well, I bet. How is that going for you now, Ryan?

You know, it's business in the front and party in the back. The girls love it. So, but the building sold. The doors are somebody else's problem. If I had to do it again, I would have replaced them in year six, not left them as a discount at closing. Upstate Doors, Waddington and Malone, New York, serves the whole North Country through 315-388-5523, UpstateDoors.com. Anniversary promo running now.

Happy birthday, America. Alrighty. Brian, tell the story of somebody who got all three legs, right? What did it actually look like? Well, her name was Elena, changed the name, changed the industry, all that kind of stuff. Composite. So eight years building a $4 million services firm, burned out. Couldn't take two weeks off without the place wobbling. ODI, right, owner discretionary index, north of nine. She decided she wanted to be ready to sell in 24 months. Not committed to selling, just ready. That distinction matters. Leg one, we got our SOS rhythm installed, leadership team built, capacity guardrails on marketing, books cleaned up with a fractional CFO, diligence prep started 18 months before any LOI, recurring retainer revenue went from 22% to a whopping 65.

Leg two, personal work started early, post exit vision on paper by month four, two nonprofit boards by month eight, first real two week vacation in eight years by month 12, and the business hit its numbers without her. That vacation was the moment she knew. Her words, not mine, they didn't need me. That's when I stopped being scared of leaving. Leg three, tax restructuring started in month three, entity cleanup, basis tracking, donor advised fund opened in month five, wealth advisor engaged in month six to model post-exit cash flow at three different exit multiples. 24 months in, revenue grew to $7.4 million, ODI dropped to 12, dropped to two, excuse me, net margin at 21%, diligence took five weeks not five months, three competing offers. Her line afterward, verbatim, and I actually dug this out of a video, I spent eight years building a company that couldn't survive without me.

I spent two years building one that could. The second project was worth 10 times more. All three legs, not just the business, that's the whole episode. Compelling. Really compelling. Owner's driving to work now, listening. What's the move this quarter? Score yourself on all three legs honestly. Take 10 minutes, piece of paper, not in an app, handwriting slows you down enough to be honest. Leg one is the business predictable, transferable, de-risked, one out of 10. Leg two, am I ready as a person? Do I have identity, purpose, structure, relationships?

Again, one to 10. Leg three, do I know my after-tax number, my post exit deployment plan, my entity and estate structure, one to 10. Whichever one is lowest gets your quarterly rock this quarter. Just one, not all three at once. Owners who try to run all three at once, they pick three rocks, they finish zero. The point is finishing one, not starting three. If leg one is lowest, install the missing rhythm. Pick one pillar from the seven and fix it. If leg two is lowest, write your post exit vision on paper this month. One page, what do you do on Tuesdays? If leg three is lowest, schedule a meeting with a tax-aware CPA or EA and a wealth advisor in the next 30 days. Same meeting if possible. Watch them have to talk to each other for the first time. Run that loop quarterly for four quarters. You'll be a different owner in a year with a different exit available to you. And then quick look ahead, Jon, this

This is the first of a set that takes each leg on its own. The Windsor Circle is the leg two episode, sold for $5 million. The marriage almost didn't survive. Same clean exit, same owner, and the Tuesday in the kitchen from our cold open. This time told all the way through. The check clears, the wobble doesn't. Leg three gets its own episode on tax architecture and leg one gets one on the operational value drivers.

Follow the show so the wobbly leg isn't the surprise on the closing day. We're not doing an episode on your third leg, are we? We most certainly not. We'll bring in Wilt Chamberlain. Good. All right, Ryan, let's skip to the takeaway. Exit readiness is a three-legged stool. The business has to be ready. The owner has to be ready. The wealth plan has to be ready.

Most owners pour everything into leg one because it feels like real work, then wobble out the closing day on legs two and three. The 75% regret rate isn't about bad deals. It's about unprepared people. Score yourself on all three legs this quarter, whichever is lowest gets a rock. Run that loop for a year. The exit you take in three years isn't decided in year three. It's decided in the quarters where you did the leg you kept avoiding.

The best time to start was 10 years ago. The second best time is this quarter. All right. That's a wrap. Sayonara. Thanks everybody out there. Oh, that's for our Japanese listener again. That's right. Adios. What's, what's thank you in Japanese? Arigato. Domo arigato. There we go. And now you learn Japanese. Yeah. These podcasts are so informative. Alright, peace out. That'll do it for this episode of From Burnt Out to Bought Out.

If anything we talked about today hit home, do us a favor. Share this episode with another owner who needs to hear it. And if you're sitting there thinking, they're talking about me, good. That's the first step. Head to the show notes and book a free triage call with our team. No pitch, no pressure, just a real conversation about where you are and what's possible. You can also find us on LinkedIn and at wearesynergysolutions.com.

New episodes drop every week. Until next time, stop running the treadmill and start building something you can actually sell.