Business owners often picture their exit as a negotiation. Find a buyer, agree on a number, sign.
In reality, most never get that far. A February 2026 report from the McKinsey Institute for Economic Mobility estimates that of roughly 510,000 small and mid-size business exits in 2022, 92% happened through closure.
Part of the problem is planning. Gallup research published in 2025 found 27% of employer-business owners 55 and older either plan to close permanently or are unsure of their long-term plan.
Almost everything that determines what you keep gets decided in the years before closing, not at the closing table. That window is what business owner exit planning is really about.
How Do I Plan an Exit From My Business?
Start with what you need the business to produce, not what you hope it sells for. Build the personal number first: the after-tax, after-debt figure that funds the rest of your life. Then find out whether the business can get you there.
Get a real valuation, one that looks past revenue to cash flow quality, customer concentration, and the strength of your management team. The gap between that number and yours is the plan.
For the next few years, your business plan and your exit plan are the same document. Buyers pay for what continues after you leave.
What Is the Difference Between an Internal and a Third-Party Sale?
An internal sale goes to family, your management team, key employees, or an employee stock ownership plan (ESOP). These typically run longer, close at a lower number, and lean on seller financing, because the buyers rarely arrive with cash. In exchange, you keep the timeline, the culture, and the jobs.
A third-party sale goes to a strategic acquirer or private equity firm. It usually produces the highest price and the most cash at closing, along with months of diligence, earnouts tied to results you no longer control, and often two or three years working for someone else.
The highest offer isn’t always the best deal. The right one clears your number on terms you can live with.
What Is an ESOP and Is It Right for My Company?
An ESOP is a retirement plan that holds company stock for employees. The company typically borrows to buy out the seller and repays the debt with tax-deductible contributions.
Through a Section 1042 rollover, a seller can defer capital gains tax by reinvesting proceeds in U.S. operating companies. Full deferral requires the company to be, or convert to, a C corporation, with the ESOP owning at least 30% of the stock. That’s the catch for S corporation owners: convert or give up full deferral. A deferral on up to 10% of the sale takes effect for S corporations in 2028.
It may be the right choice for companies profitable enough to carry the debt and buy back shares as employees leave, with successor management. The trade-off is price. An ESOP pays appraised fair market value, which can fall below what a strategic buyer offers.
How Can I Reduce Taxes When I Sell My Business?
Buyers want an asset sale for the basis step-up. Sellers want an equity sale for cleaner capital gain treatment. For Ohio owners, that choice now carries more weight.
Under current law, a capital gain deduction from Ohio’s 2021 budget bill applies starting with 2026 tax years. It covers gain on the sale of an ownership interest in a business organized and headquartered in Ohio for the five years before the sale, if you materially participated for that period. The deduction equals your gain or, if smaller, the company’s Ohio payroll for the five calendar years before the sale multiplied by the percentage you sold.
Three things matter here. It covers sales of stock or other ownership interests, not the company’s assets. Because the cap is based on payroll, a labor-intensive Toledo-area manufacturer may have far more available than a lean business with the same sale price. And it excludes wages paid to you, your spouse, parents, grandparents, children, and grandchildren, which can shrink the cap considerably.
Installment sales under Section 453 can spread gain across years, though depreciation recapture is still taxed in the year of sale.
When Should I Start Succession Planning?
Three to five years is a working minimum. Clean financials take years. Reducing owner dependence means hiring, delegating, and waiting to see whether it holds. Ohio’s deduction looks back five years, so where the business is organized and headquartered, and your role in it, have to be right long before a buyer shows up.
The owner who calls six months out hasn’t done anything wrong. They’ve just given away many of their options.
How Do I Protect the Wealth Tied Up in My Business?
For many owners, the company isn’t part of the balance sheet. It is the balance sheet. Protecting that wealth starts with two moves, and both happen well before closing.
First, stop letting the concentration grow. Every dollar you build outside the company is a dollar your retirement doesn’t need a buyer for. A qualified retirement plan moves money out of the business while you still have earned income to fund it. We’ve written before about why that concentration is the exposure to address first.
Second, protect what the buyer is paying for. That’s often the team. Deferred compensation for key people can give them a reason to stay through the transition.
You get one chance to convert what is likely the largest asset you’ll ever own. The owners who come through this well didn’t necessarily find a better buyer. They started earlier.
Stirling Capital works with business owners across the Toledo metro area, coordinating with your CPA, attorney, and valuation professional so every piece points at the same number. If an exit is on your horizon, let’s talk while planning still changes the outcome.
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