In running your HVAC construction contracting business there is only one guarantee: you eventually will leave it — either voluntarily or involuntarily.

 Exiting is not an easy process, and the odds are not in your favor. There is a lot of confusion in differentiating a business exit from a business succession. Both are needed to successfully exit your business, unlock your trapped wealth, protect your legacy and successfully move your company into the next generation or to an external buyer.

Business owners cannot commit to the difficult emotional succession process until they can clearly envision their financial future and accept the reality that they will not outlive their money.

An exit plan is a necessary tool that will assist business owners in controlling and visualizing the process while getting a better understanding for the financial aspects of the transaction. Since approximately 70 percent of business owners’ wealth is trapped inside their illiquid business, this should become a top priority.

This is a risky process. Several studies have concluded that less than 30 percent of businesses will actually transfer or sell to employees, managers or family. And when selling to an outsider, less than 20 percent of the companies that are brought to market actually close. 

Taking a bite

If you are fortunate enough to sell or transfer, you can be sure that the government will be waiting its share, which can be up to 55 percent of the proceeds. Ouch.

An exit plan focuses on turning the sheet metal works business’ trapped illiquid wealth into cash without being clobbered by taxes and not running out of money in retirement. A succession plan focuses on the company successfully performing without the present owner by moving management into leadership, ownership and eventually replacing the chief executive officer. An exit plan meets the owners’ personal and financial goals, protects their wealth and moves them into their next stage of life.

A succession plan focuses on the human side of the business. Succession replaces the owners by moving the chosen performers into leadership and ownership. This requires time and training.

An exit plan helps secure the owners’ business wealth and sets the stage to move into succession. The plan establishes and controls the process of who, what, when and how to control this course of action while protecting your wealth.

The exit can be complex and taxing on a financial and emotional level. You cannot spend 30 to 40 years of your life building a business without a strong attachment. This complex process requires specialized advice from your accountant, business appraiser, tax adviser, corporate attorney, estate planner, financial adviser and insurance agent, among others. Coordinating and understanding the often-disjointed advice can be overwhelming to a business owner who is not familiar with these concepts and terms.

The exit is also very hard from a financial perspective, where you can surrender more than 55 percent of your proceeds to taxes on the state and federal levels. In addition, each path has a different value, tax consequence and financial compromises.

Taxes can be reduced or eliminated by properly structuring, aligning and positioning the company in order to meet the complicated regulations. In this situation, time can be your best friend, so plan early.

Write it down

Writing and creating the plan can take between four and nine months and will determine all your options for exiting your business. Why is this process so important? The HVAC construction business is probably your largest asset, the financial event of your life and the final opportunity to secure a comfortable retirement.

An exit plan addresses the coordination of your options in concert with your personal, financial and business goals. You must consider whether to use a management buyout, employee stock ownership plan, private equity sale or other avenue. You must know the price needed to meet your retirement needs.

The five transfer options — sale, recapitalization, employee stock ownership plan, management buyout, gifting — have different motives, ranges of value, tax implications, structures and fees.

An exit plan defines goals, existing wealth — liquid and illiquid, the value of the available options, the net amount after taxes and fees, tax implications, titling of all assets to assess estate tax exposure, legal agreement review, insurances and investment considerations. An exit planner’s role is to design and handle this process.

An exit plan also puts the owners in control with a clear path to make an informed decision, control the process, leave the business on their terms, select whom they wish to transfer and decide when they want to exit. The exit process liberates the owners by allowing them to move trapped money out of their business, protect their wealth and move into the next stage of life.

A succession plan is about preparing the company to succeed in the absence of the owners or CEO. In a simple approach, it is about grooming management to move into leadership and then into ownership and ultimately establishing the new CEO.


To prepare, the HVAC construction business owners must clearly envision their financial futures before moving forward, be able to see themselves outside of the business before initiating the succession process, be able to lead the process but allow the team to grow, stretch and make mistakes.

A succession plan may take several months to write but several years to execute. Depending on the readiness of the management and the type of exit, a plan may take three to 10 years. But if everything is in place, the company could be ready to sell in under a year.

Owners must first deal with the exit plan so they can ensure their financial futures. This then allows owners to focus on succession so they can build the championship team that allows them to let go.

The exit plan leads the owner through a proprietary process that will meet their business, personal and financial goals while objectively examining their options for protecting their hard-earned wealth. Once the owner is comfortable with meeting these exiting goals, they can move into the succession goals of identifying who will be the next leaders and the CEO of the organization.

The great news about succession is that it adds financial value no matter which exit path you take.

The key is to start early. Exiting and succession are not events but a complex process that takes time. The exit plan will get you started, and the succession plan will bring everything together to allow you to gracefully exit your business and protect your wealth. 

Kevin Kennedy is the founder and CEO of Beacon Exit Planning LLC, a managing partner in Beacon Merger & Acquisitions Advisors LLC, a national speaker and author on exit planning and succession for private businesses. He provides plans and strategies to guide private owners with succession and exiting their businesses. For more information, visit or email 