3 Key Lessons for Business Owners: Avoid These Exit Planning Pitfalls

The Case:

Mr Wong, aged 58, owns a business that provides total instrumental and safety solutions for the Semiconductor, Pharmaceutical, and Oil & Gas sectors. After years of successful operation, a downturn in the economy caused the company’s revenues and earnings to drop significantly. At the age of 55, Mr Wong had originally planned to retire, but with the business in decline, he decided to postpone his exit with hope of restoring the company’s performance.

During this period, a competitor approached Mr Wong with an offer to buy the business. However, Mr Wong declined the offer, believing his company was worth little more than its asset value and confident that, with more time, he could turn things around. Like many founders, he wanted to leave behind a sustainable legacy—a business that would continue providing value to customers and employment to staff long after his retirement. Mr Wong’s deep personal relationships with clients, built over the years, made him especially keen to ensure these partnerships would endure post-transition.

The Initial Plan:

Although Mr Wong sought advice from various professionals—including his accountant, lawyer, and business consultant—he encountered conflicting guidance. Each advisor had a specialised focus: the lawyer emphasised legal risks, the accountant focused on tax, and the consultant proposed strategies for business growth. Without a coordinated approach, Mr Wong was left unsure of how best to exit, leading to decision paralysis.

Family succession was another consideration, but Mr Wong was uncertain. His eldest son, Nicholas, worked in a related industry, while his daughter, Clara, had little interest in joining the business. Although family ownership remained an option, Mr Wong did not actively pursue it. As a result, he continued working in the business, though his enthusiasm was declining.

Five Years Later:

By the time Mr Wong turned 60, his passion for the business had diminished significantly. Despite his efforts, he was unable to restore the company’s former performance, and a group of key management staff eventually left to join a competitor, taking important clients with them. This further deteriorated the company’s position. Finally, overwhelmed by the business’s ongoing decline, Mr Wong sold the company to a competitor for a fraction of what it had once been worth.

What Could Have Been Done Differently?

1. Comprehensive Business Valuation:

Had Mr Wong sought a comprehensive business valuation at 55, he would have better understood the true worth of his business beyond just its asset value. This could have empowered him to negotiate a more favourable deal with the initial buyer. Providend’s approach emphasises the importance of valuation as a cornerstone of exit planning, ensuring business owners have the knowledge to make informed decisions early.

2. Family Succession and Structured Transition:

Mr Wong could have followed an approach similar to that of Bengawan Solo, a well-known Singaporean bakery chain that executed a highly successful family succession plan. Bengawan Solo ensured the business continued to thrive after the transition by establishing a structured decision-making process, safeguarding the brand’s legacy and profitability.

Had Mr Wong involved his son Nicholas earlier, perhaps through structured mentorship or an external leadership program, he could have set the stage for a smoother transition, much like Bengawan Solo did. Alternatively, he could have prepared for an external sale while retaining a family interest in the business, ensuring its continuity under professional management.

3. External Sale vs. Family Succession:

Providend advises business owners to explore both paths—external sale and family succession—early in their exit planning process. By working with a Certified Exit Planning Adviser (CEPA), Mr Wong could have assessed whether an external buyer, a Management Buyout (MBO), or a family transition would best meet his goals. A coordinated advisory team could have helped him weigh these options, ensuring a smooth transition while maximising the value of his business.

Post-Exit Planning and Life After Business Ownership: Lessons from Providend’s Podcast

One aspect that many business owners, including Mr Wong, often overlook is post-exit planning—what life will look like after the business is sold. In Providend’s podcast, Beyond Retirement: Are You Prepared for Retirement, the focus is on planning not only for the sale of the business but also for the owner’s life the moment he or she retires.

After spending decades pouring their time and energy into building a company, many owners struggle with the emotional transition to life post-exit. Without proper planning, the psychological and financial aspects of retirement can feel overwhelming. For example, Mr Wong, who had become deeply connected to his business and its success, didn’t have a clear plan for his life after selling the business. This may have contributed to his reluctance to sell and his decision to stay on for another five years despite losing interest.

Providend could have provided a more holistic view of Mr Wong’s exit by helping him consider life beyond the sale. This might include creating a financial roadmap for retirement, identifying new passions or ventures, and ensuring he was mentally prepared for the transition from business owner to retiree. By having a clearer sense of his future post-exit, Mr Wong might have made different decisions earlier, leading to a more satisfying and financially rewarding exit.

Takeaways and Lessons from Mr Wong’s Journey

Mr Wong’s story is a cautionary tale, but it offers several important lessons for business owners approaching an exit:

  • Early Planning: As demonstrated by Bengawan Solo’s structured family succession, early planning for both family and external transitions is critical. Mr Wong’s delay in deciding his exit plan resulted in missed opportunities to maximise his business value and legacy.
  • Coordinated Advice: One of the key reasons Mr Wong struggled was the conflicting advice from different professionals. Providend advocates for a coordinated approach to business exit planning, where legal, financial, and business advisers work together to ensure the owner’s legacy and goals are protected.
  • Post-Exit Planning: Just as important as the sale itself is planning for life after the business. Providend’s insights from this podcast emphasise the need to create a roadmap for life post-business, preparing mentally, emotionally, and financially for what comes next.

By seeking professional, coordinated advice from the beginning, and by planning both the business transition and life beyond it, business owners like Mr Wong can avoid the pitfalls he experienced and enjoy a successful exit, securing both their legacy and future.

Reach out to us today to start crafting your tailored business exit plan, integrating it into your personal wealth plan, and leave behind a harmonious legacy for your business and family.

The writer, Jerome Song, is Associate Director, Business Exit of Providend Ltd, Southeast Asia’s first fee-only comprehensive wealth advisory firm.

For more related resources, check out:
1. Business Exit Plan: 3 Key Considerations
2. Money Wisdom Podcast: Navigating Your Business Exit Plan Successfully
3. Business Exit Planning Case Study: Common Mistakes to Avoid


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