bout half of all business owners are 55 or older, according to the US Census Bureau. As they approach retirement age, a significant financial transition looms on the horizon. However, a well-planned exit strategy can help owners protect, build, and harvest wealth when they transition, ensuring the efficient transfer of business value to their personal legacy.

Sadly, about 80 percent of business owners will not be prepared to make a successful exit from their company, according to Certified Exit Planning Advisor (CEPA) Wendy Claussen. But they can improve their chances by adopting a build-it-with-the-end-in-mind approach. “They should always be thinking about their exit,” says Anchorage-based Claussen, the owner of Horizon Trek. “Exit planning is present tense; it’s not something to do later. It’s a value multiplier.”

When owners exit their business, Claussen says, it represents the harvest of their wealth; in most cases, 80 percent of their net worth is locked in the company. Executing a well-planned exit is perhaps even more critical for the owners of small businesses, which covers 99 percent of US companies, according to the US Small Business Administration’s 2024 Small Business Profile.

Claussen says there are eight primary “inside” and “outside” exit routes. The four inside options are intergenerational transfer (which 50 percent of owners desire but only 30 percent achieve due to limited viable successors), management buyout, sale to existing employees, and sale to existing partners.

The four outside options are a traditional sale to a third party; recapitalization, or finding a new way to fund the company’s balance by bringing in an equity investor or lender as a partner; selling stock with an initial public offering, which is a rarity for small businesses; and liquidation, which is typically only advisable if the asset value exceeds the company’s ability to produce income.

In Alaska, the most common inside exit options are management buyouts and sales to partners. For outside exits, third-party sales are most frequent. “There are plenty of buyers, including private equity and small families that want to invest here,” Claussen says. “There are plenty of investors from the Lower 48 who want to come into this market.”

Selecting the right exit option depends on what owners envision for the next chapter of their lives. According to Claussen, effective exit planning should address these three essentials: personal (what owners want to do post-transition), post-financial (how they will fund their lifestyle), and business-financial (how they will maximize business value for the best possible return).

The intricacies of exit planning can be challenging for business owners, which is why working with a trained expert can be beneficial. CEPAs can help business owners “align personal and financial goals while maximizing transferable business value,” according to the Exit Planning Institute, which created the CEPA program in 2007. In her role as a CEPA, Claussen specializes in helping business owners make complex decisions when planning for retirement. Her firm guides clients through the “transformative experience” of buying, selling, or increasing the market value of their business.

Timing is crucial for exit planning. For the 20 percent of owners who actually sell their business, the process typically takes nine to eighteen months to find a buyer and close the deal, according to Christian Muntean, CEPA and president of Anchorage-based Vantage Consulting. Post sale, there is often an “earnout” period, during which the seller remains involved—usually as an employee—to ensure a smooth transition. “This means you should expect at least one to three and a half years of continued involvement in the business from the moment you go to market,” Muntean says.

Ideally, owners should allow three to five years for exit planning to maximize their value and terms options. Under three years is risky, and under a year is “lipstick and rouge” (as in, “on a pig”), Muntean says.

He elaborates: “It’s possible to sell on a short timeline, but most owners mistakenly treat it like selling a house, relatively quick and simple. It’s not. You dramatically increase the chances that you’ll have to accept a liquidation. Even if you do sell, you almost certainly will give up value or have to accept poor terms.”

Muntean says owners can begin exit planning at any time—and earlier is better. A business that runs well, generates profit, and doesn’t rely on the owner is already “exit ready.” Muntean emphasizes: “You can build that years before you want to leave. From that view, a good exit strategy is good business strategy.”

The prime purpose of successful exit planning is to help owners protect, build, harvest, and preserve wealth. How these phases fit into the planning timeline will vary based on the business’ current state and the owner’s goals, Claussen says.

The first phase—discovery—typically takes about a month and includes a business valuation, business readiness assessment, and personal readiness assessment. Then owners can develop a prioritized action plan for protecting and building value, followed by setting achievable goals for growing the business in one to three years. “You want to maximize the value,” Claussen says. “When you build the value, income is inherently a result of that. Investors want to see that all your margins have been increasing at least for over two years. It’s got to have a trend.”

The preserving phase is a post-transaction plan that is typically established in the beginning. “You are executing on however you are reinvesting those proceeds, whether it’s charitable giving or putting them into an investment vehicle,” she says. “The best time to start is today. If you want to maximize the value of the company, you want to start three years in advance.”

Unfortunately, only about 20 percent of small business owners who seek to sell will find a buyer. “These owners have worked so hard, often sacrificing personally, to build something of real value,” Muntean says. “And in a state like Alaska, these businesses often hold institutional knowledge and skills our communities rely on.”

Most businesses fail to sell because they have been built as a “custom fit” for the owner. This can make their company less appealing to potential buyers. “It’s like buying a car and needing to know how to wiggle a key just right to get it to start,” Muntean says. “Buyers (and their lenders) don’t want to take that risk.”

Other common deal killers are dependency on the owner, emotional unreadiness, and poor financial records or management. For example, if the owner is needed for day-to-day operations—even a little—it undermines value. The solution is to build a team that can operate independently, Muntean says.

On the emotional side, about 85 percent of sellers unintentionally self-sabotage their exit, Muntean says. They may drag their feet, make unrealistic demands, or suddenly pull parts of the business out of the deal. This is usually because their sense of identity and purpose is wrapped up in the business, or they do not have a compelling “next chapter” that they are excited to pursue.

To test their emotional readiness, business owners should practice taking long vacations where they do not have to check in with work. This forces them to build a business that will operate without them. They should also ask themselves what they want to do with the rest of their life. “Your answer might be (this is often the case), ‘Maybe I don’t really want to sell,’” Muntean says. “That’s okay. But be honest about what that means in terms of your energy, interest, health, and drive. It’s sad to see a robust and valuable business go into decline because the owner doesn’t really have the drive to make it excel but also doesn’t know what else to do.”

Poor management is another red flag and potential dealbreaker. Buyers and their banks want clean financials, which generally means at least three to five years of consistent statements. “If all the owner has are tax returns, expect to sell at a discount—if you can sell at all,” Muntean says.

Some owners also pack personal expenses into the business to avoid taxes. While this may work short term, it impacts the sale value. “Expect buyers to ‘recast’ or adjust your financials to estimate what it will take for them to run your business,” he says.

The upshot: when owners build businesses that are not dependent on them, maintain clean books, and are emotionally ready, they create an enterprise that runs better—even if they never sell. “That usually means more freedom, better margins, and less stress,” Muntean says. “This kind of business is very easy to sell.”

One of the most frequent mistakes Claussen sees business owners make with planning their exit is waiting too long to start the process. Often, owners are focused on day-to-day tasks; when they are finally ready to retire, they’re burned out and want to exit immediately. “But it’s common that a lot of them are personally not ready for their next chapter, and their business is not ready to transfer to new ownership,” Claussen says.

Many owners do not have a clear view of what the next chapter looks like and how to fund it. Starting the planning process earlier makes it easier to afford the life they envision. Exit planning should be viewed as both a personal and business tool—not a task to postpone. “If you have an effective exit planning strategy in place, you can exit when you want to exit,” Claussen says.

As part of their exit strategy, owners should get a business valuation done and updated annually, Claussen says. This can help them see how potential buyers will view their business. They should also have a plan for the “5 Ds”—death, disability, divorce, disagreement, and distress—possibly even before the business valuation. These actions de-risk the business and make it easier for the owner to exit at any time.

In places like Alaska, where the market is smaller and more specialized, there are distinct challenges and opportunities for small business owners, Muntean says. Alaska’s business culture is still relatively young. Fewer owners have exited successfully—so there’s a lack of local mentors or advisors with deep experience in this space.

“Rural businesses do face smaller local buyer pools,” Muntean says. “But if the business is well-built and runs well, that hurdle is usually overcome with enough time and planning.”

Some Alaska business owners have the unique hope that an Alaska Native corporation (ANC) will buy them out. “There was a period of time when ANCs were buying many local businesses,” Muntean explains. “But as they have grown in experience, they have (rightfully) become more careful about what they buy. And there is a trend for many to want to diversify their holdings outside of Alaska.”

He continues: “This doesn’t mean an ANC won’t come and sweep you off your feet. But you will likely need to be much better prepared than what was true ten to fifteen years ago.”

The encouraging truth is that there is far more money looking for a good business to buy than there are good businesses ready to sell. “It’s actually surprising how much money is out there,” Muntean says. “Private equity firms often evaluate 100 to 200 companies before making a deal. For sophisticated buyers, the pickings appear slim. The good news is: If you prepare well, it’s easy to stand out and command a much higher valuation.”

Alaska’s unique market does not outweigh exit strategy basics, however. “A well-run, exit-ready business is almost certainly going to find a great buyer—if you give yourself the time,” Muntean says.

With a well-executed exit strategy, business owners can ensure they have a viable plan—and the wealth they have harvested will fund that plan, Claussen says. They can also have the satisfaction of knowing their legacy is continuing. “You’ve built and sold a business that is continuing to employ and grow future leadership,” she says. “That’s peace of mind to know that your work lives on.”