Key Takeaways:
A successful business is generally the foundation of the owner’s wealth, a reflection of their identity, and a source of their legacy. After decades of hard work and dedication, there’s a great deal at stake when owners retire or choose to step aside. A successful transition requires meticulous planning to increase the company’s odds of long-term success and safeguard the owner’s personal wealth and legacy.
In this article, I share some of the fundamental ways our team at Cambridge Trust Wealth Management, a division of Eastern Bank, advise business owners as they look to exit their business and navigate the transition to retirement. In our experience, the best outcomes result from an integrated approach to business succession and personal financial planning. We believe owners’ needs are well served by engaging in both types of planning concurrently for five to ten years prior to exit.
The Challenges Owners Face When Planning
It would be no surprise to learn that most owners intend to retire one day and sell or transfer their business; however, it may be surprising to know that only a small percentage get around to making formal plans. A 2023 study by the Exit Planning Institute found that 56% of business owners did not have a formal succession plan. Similarly, in a 2024 Gallup poll, one-third of business owners had no exit plans whatsoever and were unsure about the future.
Owners postpone planning for many reasons. Some say they lack the time for long-range thinking due to the daily demands of running the business. Meanwhile, emotional factors also play a role. If an owner closely identifies with the business, they may equate “letting go” of their business with losing purpose and relevance.
In some cases, owners who compartmentalize or separate their business and personal goals may hesitate to integrate them. For example, when business goals are at odds with family dynamics, planning may be postponed in favor of maintaining harmony.
In all cases, the consequences of inertia can be significant and can include undervaluing the business in a rush to sell it, seeing the business flounder due to unprepared or inadequate leadership; creating family conflicts over inheritance; and having insufficient retirement income. On the flipside, there is also a risk of overvaluing the business due to overconfidence and bias about future profitability and growth. In either case, the outcome is not ideal and, in my experience, is avoidable.
Ways to Break Inertia
With competing demands on their time and attention, many owners find that careful planning begins with a mindset shift. That is, retirement isn’t an exit, but the start of something new. Rather than view their exit as the end of a chapter, owners can frame it as the start of a bright new one. They might approach this new beginning with a renewed sense of energy, optimism, and commitment that made their business successful in the first place.
We encourage owners to fully commit to the process of planning by assembling a team of advisors and meeting with them regularly. Getting smart financial, accounting, legal, and business valuation advice can accelerate or enhance a company’s value and mitigate personal and business tax liabilities.
Owners are well advised to think holistically in the decade prior to their exit. This allows for exploring the connections between personal and business goals and making sure the relationship is harmonious.
Choose an Appropriate Exit Strategy
A large part of succession planning involves identifying the owner’s preferred exit strategy. Some owners plan to close the business when they retire, and others intend to gift it to the next generation. Most owners, however, intend to sell their business to family, employees, or a third party and retire on the proceeds of the sale. It’s important to be realistic about the challenges of selling a business. Ultimately, only 20% to 30% of privately owned businesses sell. (Exit Planning Institute, June 2025) As a result, most owners need a backup or contingency plan that includes accumulating personal savings outside of the business for retirement income needs.
An essential part of the planning process is having the company valued by a certified business appraiser. Owners who choose to value the business themselves often overestimate its worth because they lack objectivity. An objective appraiser can offer accurate value which can be updated periodically. Accuracy is important because the value will figure prominently in the owner’s financial situation, particularly their estate plan, and income replacement strategies.
Having a lengthier planning window of 10 years affords the owners of family businesses time to analyze family dynamics and explore options to equalize the inheritance. This becomes especially important in situations where only some of the children will inherit the company. Being fair to the others may require an equivalent inheritance in cash or other assets. Owners of larger businesses may have ready access to these funds, but small business owners usually need time to explore other worthwhile options such as purchasing a life insurance policy or establishing a trust.
Integrate Personal Financial and Business Succession Planning
Owners of businesses (especially those valued below $5 million) often invest so heavily in their companies that they underfund their own personal retirement savings. As a result, their future financial security depends entirely on whether the business transacts and for how much. Their ability to exit on their own terms is greatly diminished.
The early adoption of integrated financial and exit planning helps owners avoid this outcome by giving them greater control over decisions that will impact their wealth and legacy.
Some owners prioritize finding a like-minded buyer. Given the choice, they prefer to protect their business legacy rather than sell to a party that doesn’t meet their vision. They can make that decision when they’ve planned comprehensively and are confident of their financial situation.
As an example, one Cambridge Trust Wealth Management client rejected an offer at full asking price because the bidder didn’t share their values and vision for the business. When the owner’s ideal successor emerged, the offer was below asking price; however, our client had the flexibility to accept it. They were well prepared, having planned holistically for this potential outcome. With the guidance from their financial management team, they had been intentional about investing outside the business and had the personal savings and assets to meet their retirement income and other goals.
Build a Diversified Investment Portfolio
Sound financial planning involves prudent investment management. If a business has sold for a substantial sum, the proceeds are typically invested with the primary objective of safeguarding the owner’s wealth. With tax-efficient management and proper diversification, the portfolio may be sufficient in size to support all the owner’s objectives. These goals may include producing retirement income, supporting charitable causes, transferring wealth to family members, and more.
Meanwhile, sound investment management is also critical for owners of smaller companies regardless of whether the business transacts. In these cases, personal assets comprise most of the portfolio and the primary objective usually revolves around the creation of tax-efficient retirement income.
Experience has shown us that business owners are accustomed to asserting control in their leadership roles and can be concerned about the uncertainty associated with investing. This is where owners gain significant value from a financial management team that takes a long-term, respectful approach, addressing concerns with care and aligning recommendations with each client’s risk tolerance. As fiduciaries, they manage assets prudently and always in the client’s best interest. When appropriate, the advisory team may recommend portfolio strategies or products designed to provide dependable returns and support lifetime income needs.
Talk About It: Regular Communication Is Essential
Owners are sometimes reluctant to discuss their business succession plans with family members and direct reports. These conversations may be difficult at times, but they are essential for maintaining transparency and fostering trust.
Family discussions provide an opportunity to help owners avoid future conflict about inheritance, and in the case of family businesses, sidestep misunderstandings about roles and responsibilities. Family members value these conversations as an opportunity to learn as well as a chance to express their opinions and points of view.
Communicating with the senior leadership team at work enables owners to gauge employee interest in buying the business and the opportunity to develop an Employee Stock Ownership Plan. Alternatively, discussions can involve offering special incentives to retain and develop key talent or tap and train a successor.
Planning Is a Process
Exiting a business is a major event that requires years of careful planning. Thinking holistically and planning comprehensively as much as a decade in advance of retirement provides more options for business succession and wealth transfer. A well-structured planning process gives owners the opportunity to achieve financial security in retirement and preserve their assets and legacy across generations.
Cambridge Trust Wealth Management is a division of Eastern Bank. Views are as of August 2025 and are subject to change based on market conditions and other factors. The opinions expressed herein are those of the author(s), and do not necessarily reflect those of Eastern Bankshares, Inc., Eastern Bank or any affiliated entities. Views and opinions expressed are current as of the date appearing on this material; all views and opinions herein are subject to change without notice based on market conditions and other factors. These views and opinions should not be construed as a recommendation for any specific security or sector. This material is for your private information, and we are not soliciting any action based on it. The information in this report has been obtained from sources believed to be reliable but its accuracy is not guaranteed. There is neither representation nor warranty as to the accuracy of, nor liability for any decisions made based on such information. Past performance does not guarantee future performance.
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