Half of All Business Exits Are Unplanned (and Why Yours Doesn't Have to Be)
The short version: Roughly half of all business exits are unplanned, triggered by death, disability, divorce or a partner dispute. The owners who come through those events well aren't lucky. They ran the company so it could be sold at any time. That same work, reducing owner dependence and building systems a buyer can trust, is also where hidden profit lives.
Two of my podcast guests, exit planners Pat Ennis and Corby Megorden of ENNIS Legacy Partners and sell-side CFO Jay Jung of Embarc Advisors, look at exits from opposite ends of the table. They arrived at the same conclusion I did after three decades on the shop floor: exit readiness and operational excellence are the same project. This piece walks through why unplanned exits are an operating risk, not a paperwork problem, and what an owner can do about it while there's still time on the clock.
The Building and Loan Nobody Planned to Inherit
Picture George Bailey. Suitcase packed. College brochures in hand. He's leaving Bedford Falls to see the world, and he means it.
Then his father has a stroke, and the board of the Bailey Building and Loan makes it clear: either George takes over, or Mr. Potter takes the company apart. So George stays. For decades. Every plan he ever made for himself ends up in a drawer.
Hollywood sold that as a wonderful life. I've sat across the table from enough Georges to know it's also a terrible succession plan.
Who at the Building and Loan knew how Peter Bailey priced a loan?
Nobody. That's the point. The father was the business. When he was gone, the only thing holding the company together was a son who never intended to run it.
Every business will have an exit. The only question is whether the owner planned it or the calendar did.
Half of All Exits Are Unplanned
Pat Ennis and Corby Megorden have spent more than ten years helping owners prepare for the day they leave. Pat's opening line on our podcast was as blunt as it gets:
"There aren't many absolutes when it comes to being a business owner, but there is one absolute. You are going to exit. You're going to pay taxes, and you're going to exit eventually, one way or another."
~ Pat Ennis, ENNIS Legacy Partners, on the Shocking Profit Podcast
Corby put a number on the "one way or another" part:
"Fifty percent of exits are unplanned. Death, disability, divorce, disagreement. And it leaves the survivors to clean it up. That is a mess."
~ Corby Megorden, ENNIS Legacy Partners, on the Shocking Profit Podcast
Half. Not a rounding error. Not a rare tragedy that happens to other people. A coin flip.
And even the planned exits go sideways more often than owners expect. Pat shared another figure that stopped me. As he put it on the show, 75 percent of owners are miserable within one year of leaving. The money came through, but their identity didn't.
Owners know this. The Exit Planning Institute survey Pat cited found that millennials prioritize planning more than Gen X or baby boomers. Baby boomers, the generation with the most businesses to hand off, sat at the bottom. As Pat said, "even though they know they need it."
Knowing you need a plan and having one is separated by a very expensive gap.
An Unplanned Exit Is Really an Unplanned Operating Risk
Most owners hear "exit planning" and picture an attorney, an accountant and a stack of documents. That's part of it. But I want to show you what an unplanned exit actually looks like from the inside of an operation, because that's where it does the damage.
Imagine a company we'll call Bolt From the Blue Fasteners. Picture a founder named Hank. He's 63, and the business does about $40 million in specialty fasteners for the ag equipment and trailer markets. Hank's son-in-law runs the shop floor, and he's good at it. Hank runs everything else. Pricing lives in his head. The three largest customers call his cell phone. He negotiates with the bank, renews the insurance, and approves every purchase order over $5,000.
Now Hank has a heart scare. Not fatal, thank God, but he's out for six weeks.
Inside those six weeks, the team discovers what Pat Ennis calls owner centricity: how central the owner is to the daily operation of the business. Three quotes sit unanswered because nobody knows how Hank prices a custom run. The largest customer calls twice, gets a voicemail twice, and calls a competitor once. The bank line renewal lands on the controller's desk, and she has never seen the covenant math.
None of that is a people problem. Hank's team is capable. The system was built so that only Hank could run it. Pat's team has a process for measuring exactly this:
"We call it owner centricity. We have a process to take owners through to see how central they are to the business. A lot of these businesses are founder-led and delegation has been hard. It's easy for me to do it myself. It takes more work to delegate and train."
~ Pat Ennis, ENNIS Legacy Partners, on the Shocking Profit Podcast
Now look at it from the buyer's chair. Jay Jung has run sell-side quality of earnings and prepared businesses for sale for years. When he walks into an operation, key-man risk is one of the first things he prices:
"If I see the owner doing everything and then a lot of junior people, that feels like a lot of risk in the org structure, and I'm gonna have to make a lot of investments going forward."
~ Jay Jung, Founder, Embarc Advisors, on the Shocking Profit Podcast
So the same condition, Hank in the middle of everything, shows up two ways. If the exit is unplanned, it becomes a crisis for the survivors. If the exit is planned, it becomes a discount on the multiple. Either way, the owner pays.
This is where my world and the exit planners' world meet, and where the work looks different. In operational diligence, we don't ask the owner how central he is. We count. How many decisions in a normal week route to one desk. What share of revenue sits with customers whose only real relationship is the owner's cell phone. How many pricing rules exist in one head and nowhere else. How long a quote, a purchase order or a credit decision waits when the owner is on a plane.
In Shocking Profit I call hidden value “Black Gold”: profit that's already in the business but invisible, unmanaged or assumed away. In company after company, it's buried exactly where the owner is the workaround.
Fixing it is the shift the book calls moving from Chief Producer to Developer of Leaders: the owner stops being the person who does the most important work and starts growing the people who can. Reduce owner centricity that way and you don't just de-risk the exit. You uncover the profit.
The owner who is the system is the owner who can't sell the system.
If you'd rather run Hank's six weeks on your own company before life runs it for you, that's the first conversation we have with owners. It takes 20 minutes: calendly.com/tvm.
The Most Expensive Sentence in Your Business
If owner centricity is the structural risk, there's a cultural one sitting right next to it. Pat named it:
"A lot of times assumptions have been made. This is a very expensive sentence: we've always done it that way."
~ Pat Ennis, ENNIS Legacy Partners, on the Shocking Profit Podcast
I've heard that sentence on hundreds of plant tours. It shows up as the pricing formula from 2009 nobody has re-checked, the vendor contract that has renewed on autopilot for a decade, and the "temporary" spreadsheet that has been in production for eleven years.
Jay's version of the same discovery involves a payroll provider:
"We had a client where we asked, when was the last time you renegotiated your rates with ADP? And it was 20 years ago. Twenty years ago they were a 10-person firm. Now they're hundreds of people. And ADP was still billing them the same rate."
~ Jay Jung, Founder, Embarc Advisors, on the Shocking Profit Podcast
Twenty years. Nobody was careless. Nobody was lazy. The business simply outgrew an assumption nobody went back to test. Corby's advice:
"Test your assumptions. People assume value. Test it. People assume they can retire. Test it. People assume they can sell their business. Test it. And you don't do that by talking to the guy you drink a beer with on the golf course."
~ Corby Megorden, ENNIS Legacy Partners, on the Shocking Profit Podcast
That's Awareness, Acceptance, Action in one breath. Awareness is the test. Acceptance is admitting the answer might not be the one you wanted. Action is what you do with the runway you have left.
"We've always done it that way" is the sound of an assumption compounding interest against you.
Run the Company So You Can Sell It Any Time
So what does the fix look like? Jay summed it up nicely:
"The best principle is really to run your company so that you can sell at any time. That's what public companies do."
~ Jay Jung, Founder, Embarc Advisors, on the Shocking Profit Podcast
That doesn't mean shopping the business. It means the business could pass a buyer's diligence tomorrow, with no scramble. Books that hold up under a quality of earnings. A leadership team that runs the week without the owner's cell phone. Processes a buyer's team could watch run on a day the owner is out.
Jay's point is that this work pays off whether or not a sale ever happens:
"Getting a company ready for a sale is de-risking it. Even if they keep holding the business, it doesn't feel like they're holding on to a precarious business. They know the business has resiliency because it has all those systems in place."
~ Jay Jung, Founder, Embarc Advisors, on the Shocking Profit Podcast
I've lived this one in my own family. My sister Caryn O'Sullivan built Drapery Street into a real company. She did the work to make it sellable: leadership in place, processes documented, numbers she could trust. And then she looked at what she'd built and decided to keep it. Her words: "my company is now my hobby." She still owns the business. She no longer carries it. That's the option Jay is describing. When the business can be sold any time, walking away from a bad deal costs nothing, because the alternative is a company that runs beautifully without you.
There's a financial reason to do this early, too. Jay walked through the math on a middle-market sale. The number that matters most is cash at close to the owner, because everything else is a promise. And the promises don't hold up well. In Jay's experience, earnouts currently pay out about 21 cents on the dollar, because they're poorly structured. A business with low owner centricity, clean numbers and a proven team gives a buyer fewer reasons to push value into an earnout in the first place.
A sellable company and a well-run company are the same company.
Time Is the Only Ingredient You Can't Buy Back
Every guest I've had on this topic ends up at the same word: runway.
Jay describes a typical sale as six months: two months to prepare, two to market, two from letter of intent to close. But he lights up when a client calls a year or two ahead. In his words, twelve to 36 months before a sale is "the golden window," because that's when the operating changes have time to show up in the trailing numbers a buyer will pay for.
Corby made the same point from the owner's side, and he made it about emotion as much as money:
"With six years you can start tweaking, testing, making some mistakes, slowly taking your hands off the wheel. With six months there is no time, other than de-risk a few things. Time diminishes the angst quotient."
~ Corby Megorden, ENNIS Legacy Partners, on the Shocking Profit Podcast
The angst quotient. I'm stealing that. Because that's the real reason owners put this off. Pat said that after ten years of this work, procrastination is mostly emotional. "This is who I am." Planning to leave feels like planning to disappear.
I understand that better than I'd like to. Doug Blanchard, my business partner, and I started building ProAction's succession and continuity plan three years before we needed it. When Doug had to step back suddenly, the finances he'd spent a year turning into a documented process transferred to a colleague (thank you Greg!) in about a week. Pat, who helped us with that planning, said on the show that it went as smoothly as it possibly could because of the work done in advance. I'd give anything for that plan to have stayed on the shelf. I'm grateful every day it didn't have to.
That is what an unplanned exit looks like when there's a plan underneath it. The business survives. The people are protected. The grief is still real, but the mess isn't.
What would your company look like six weeks from now if you weren't in it?
If the honest answer makes you wince, you don't need a better attorney. You need to start reducing your own centrality, one process at a time, while the calendar is still on your side.
Half of all exits are unplanned. None of them have to be unprepared.
Key Takeaways for PE | Key Takeaways for Owner-Operators |
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FAQ
What is an unplanned business exit?
An unplanned exit is a change in ownership or control the owner did not choose or schedule. Exit planners commonly group the triggers as death, disability, divorce and disagreement (a partner or family dispute). Corby Megorden of ENNIS Legacy Partners estimates that roughly half of all exits fall into this category. What makes them costly isn't the trigger itself. It's that the business was built around the owner, so when the owner is gone, pricing knowledge, customer relationships and approval authority go with them. The survivors are left to reconstruct how the company actually ran, often while trying to keep customers and a bank relationship intact at the same time.
How far in advance should an owner start exit planning?
Longer than feels necessary. A sale itself can run about six months, but the operating changes that raise value take time to show up in trailing financials, which is what a buyer pays for. Jay Jung of Embarc Advisors calls twelve to 36 months before a sale the golden window. Corby Megorden frames it in terms of emotion as much as money: six years gives an owner room to test, make mistakes and take their hands off the wheel gradually, while six months only leaves time to de-risk a few things. The practical answer is to start reducing owner centricity now, whether or not a sale is on the horizon, because half of exits arrive without an appointment.
What is owner centricity and why does it matter to buyers?
Owner centricity is the degree to which the daily operation of a business depends on the owner personally: pricing decisions, key customer relationships, vendor negotiations, bank relationships and approvals. ENNIS Legacy Partners uses a formal process to measure it. Buyers care because it's key-man risk. Jay Jung describes seeing an owner doing everything with junior people beneath them as a signal that he'll have to make significant investments after close, which shows up as a lower multiple or more value pushed into an earnout. From an operations standpoint, high owner centricity also marks the places where profit is hiding, because the owner has become the workaround for processes that were never built.
Does exit readiness only matter if I plan to sell?
No. As Jay Jung puts it, getting a company ready for sale is de-risking it, and the owner benefits whether they sell or keep holding the business. A company that could pass diligence tomorrow has clean numbers, a leadership team that runs without the owner, and tested processes. That's the same company that survives an unplanned exit, weathers an owner's medical leave, or lets the owner take a real vacation. It also gives the owner leverage: when a deal comes along with a weak structure, walking away is easy, because the alternative is keeping a business that runs well. Exit readiness is simply good operating discipline with a deadline attached.
Why do earnouts pay out so poorly?
Jay Jung's experience is that earnouts currently pay out about 21 cents on the dollar, mainly because they're poorly structured and depend on post-close performance the seller no longer controls. That's why he treats cash at close to the owner as the most important number in any deal. The way to keep value out of an earnout is to remove the buyer's reasons for wanting one: reduce owner centricity, prove the numbers with a quality of earnings, and show a management team with a track record. The less the buyer has to take on faith, the less they'll ask the seller to guarantee. This is general guidance, not advice for any specific transaction.
If you're a PE operating partner trying to price the risk sitting in the corner office, this is what my team does in operational diligence: measuring how much of the business runs through one person, what that costs, and where the profit is hiding behind it. Call (312) 726-6111, or grab 20 minutes directly on my calendar at calendly.com/tvm.
If you're an owner who wants to start this work while the calendar is still on your side, join us at the S³ Enterprise Value Seminar, Hidden Retirement Harvest, on Wednesday, November 4, 2026 in Chicagoland. ProAction is co-hosting it with Middle Market Methods. It's invitation-only and limited to 50 seats. Send me an email at tim@proactiongroup.com to request a seat.
The longer playbook, including the Risk Reduction lever and the path from Chief Producer to Developer of Leaders, is in the book. Shocking Profit is available at shockingprofit.com.
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