Succession planning and exit planning are often used interchangeably, but the truth is, they aren’t interchangeable. Both approaches offer different strategies and tools with different goals and results. However, succession planning is inherently linked with exit planning. Continue reading to learn more about their different approaches. 

Exit Planning

Exit planning is a process where business owners prepare their company for their eventual exit and the subsequent transition in ownership. This process may include selling the business, merging with another company, or using other exit strategies. The goals of exit planning include minimizing costs, reducing taxes, and maximizing business value. Exit planning is all about utilizing the present to guarantee a rewarding future. 

Succession Planning

Succession planning differs from exit planning in that it focuses on developing key internal business members and/or family members to take over leadership roles in the organization. It involves identifying critical roles, recognizing potential ensuing vacancies, and readying key individuals for their new responsibilities. Succession planning is not simply giving up your business; it is a comprehensive plan designed to achieve current and future goals. 

What’s the Better Option?

Every business is different and has unique needs. Succession planning requires the right circumstances; not every business has employees who would make good owners, and not every business owner has a family member willing to take the mantle of their company. Exit planning and succession planning are both effective strategies for obtaining your future goals, and they aren’t necessarily exclusive of each other. Exit planning should be a part of every business owner’s long-term business plan, but not every exit plan includes succession planning.

Are you interested in planning, but you’re unsure what plan is best for your business? You need a professional mergers and acquisitions advisor on your side. Contact Stony Hill Advisors to discuss your options with our experienced team of M&A advisors. Let's work together.