Creating a Five-Year Exit Plan: Part 1

Editor’s note: Recently a number of agency principals have asked us about exit plans —how they can transition out of the agency while maximizing income and ensuring that the agency continues to grow and flourish after they leave. To help agency principals with their planning process, we composed this article. 

Are you an agency principal interested in developing his or her own exit plan? Second Wind is proud to offer this ten-step plan for achieving a profitable retirement.

Why you need a plan:

Most agency principals are too busy running their agencies to plan their own retirement. So when it’s time to get out, many owners have to settle for a compensation package that is a lot less than it could have been had they planned well in advance.

If you create an exit plan five years before you are ready to leave, you can maximize the sale price and make sure you have the right people in the right place to run the agency profitably after you leave—the continued success and profitability of the agency is important to your buyer.

Once you have a plan, every move you make on a day-to-day basis will be moving you toward your exit objectives.

Our exit plan program is divided into three parts.

  1. Setting goals:  Defining your retirement objectives
  2. Conducting agency inventory:  Evaluating your agency’s current performance versus goals
  3. Creating a plan:  Developing a five-year plan that will enable you to meet your goals


Setting goals:

Before we begin the planning process, take a minute to think about what you want for yourself and for the future of your agency.

A.  Timing  –  When do you want to get out? There may be a number of factors in your life influencing your time schedule:  paying for college, how many years until your Social Security and/or your pension plans kick in, when your mortgage is paid off, when your spouse plans to retire, if you will have another job after you leave the agency, any debts you’re in the process of paying off, and perhaps most important, the state of your mental and physical health. If you’re in a “burn-out” mode right now, you may want to adapt your exit plan to fewer years so you can get out more quickly. 

Now is also a good time to think about what you will do after you leave the agency. Most entrepreneurs need a business context of some kind that provides a chance to compete. Be honest with yourself about what you plan to do after you retire. 

B.  Money  –  Try to estimate the income you will need annually after you leave the agency. Consider all income sources you’ll have other than from the sale of the agency. This will give you a pretty good idea of how much income-producing capital you will need from the sale of the agency.

C.  Your Involvement  –  Do you really want to be completely, 100 percent out?  Or, if possible, would you like to continue some level of involvement with the agency (sit on the board of directors)? Most agency principals I’ve talked with are 100 percent involved in their agencies, so when it’s time to go it’s best to make a clean exit, be paid fairly for everything you’ve accomplished, and let the next management team take it from there.

D.  The Agency’s Culture  –  Think about the agency after you leave—is it important to you that the culture and work ethic stay the same? Or, is it okay if someone comes in and “shakes things up” with a management style very different than your own? One of our member agencies was all set to sell the agency to a larger agency in another town. The member agency had promotional capabilities and retail experience the larger agency needed. They agreed on price and a pay-out schedule, and then our member learned that the larger agency was going to move the key people and clients to the larger agency and then shut down the member’s office. At that time our member realized how important it was to maintain the agency with its own personality and employees.

You should set goals without considering your agency’s current ability to meet the goals—this is the time to create your “dream sheet.”

Read more in Creating a Five-Year Exit Plan: Part 2.