Five things, mostly: divorce, disagreements with partners, disruption, disability, and death. An exit-planning advisor I had on the podcast calls these the "5 Ds," and his point wasn't that you can predict which one hits you. It's that a business without a plan for any of them can end up in what he calls a fire sale. The businesses that hold up aren't the lucky ones. They're the ones already built and insured to keep running without the owner at the center of every decision.
The 5 Ds, as he laid them out
"There's 5 Ds that I refer to, that cause a business to kind of fail or to have to sell like kind of in a fire sale. It's a divorce, which is pretty common. Disagreements with partners. Disruptions, kind of like COVID and things like that, I mean you can't plan for that. Disability and death."
Divorce. Common enough that he named it first. If ownership isn't cleanly structured, a divorce can force a valuation or a sale on a court's timeline, not the owner's.
Disagreements. Partner disputes over direction, money, or an exit can freeze a business or force a sale nobody actually wanted.
Disruption. A shock nobody saw coming, a COVID-style event, a lost major customer. He was blunt about it: you can't plan for the event itself, but you can plan for how thin or thick your cash reserves are when it hits.
Disability. The one he says owners are least prepared for, and where he spends the most time pushing back on owners.
Death. The final version of the same problem, except now the business's continuity, not just the owner's income, is at risk.
A lot of owners think none of this applies to them. He hears it constantly: "you don't actually know if that's going to be 30 years from now or if that's going to be tomorrow."
Why disability is the one that catches owners off guard
Of the five, this is the one he says gets waved off the most, because it doesn't sound as final as death. But the math plays out the same way, just slower.
Here's how he explained it: owners tell him all the time that they don't need disability insurance because the business will keep running and they'll just take their normal distributions or salary. His response: say you're disabled for nine months to a year, cancer, a long recovery, whatever it is. Who runs the business? Maybe there's a great manager who can step up. But are they going to do that for the same salary they were already making, now that you've stacked all these additional responsibilities on them? They probably deserve more. Where does that money come from?
If you're pulling your own income out of the business to live on, you're leaving less in there to pay the person actually covering your role. That's the trap: without personal disability insurance sized to replace your actual income, owners end up draining the business to cover their own living expenses at exactly the moment the business needs that cash to fund someone else doing the work. Disability insurance isn't there to replace the business's income. It's there to cover you personally, so the business doesn't have to.
An unplanned exit is still an exit, just a messier one
If you're the owner who says "I'm going to die at my desk, I don't need an exit plan," his response is direct: that's fine, but it's still an exit. It's just a messy one. Without a management team, clean financials, and some operational structure, you're leaving a lot for other people to clean up. If something happens to you and there's no list of who to call, no attorney, no CPA, no plan, your family is already dealing with losing you. Now they're also stuck figuring out how to run, sell, or wind down a business they may not even want to keep.
Building for the 5 Ds is the same work as building a sellable business
None of the 5 Ds get scheduled. What you control is whether the business is built to take a hit without your presence being the thing holding it all together. A short starting list:
- Buy-sell agreement. If you have partners, is there a signed, funded agreement covering death, disability, divorce, or an unresolved dispute?
- Personal disability insurance, sized to actually replace your income, not a policy bought once and forgotten.
- Documented processes, so someone besides you could run the core of the business for a stretch if you couldn't.
- Cash reserves that let you absorb a shock instead of reacting to it under pressure.
- Clean, current financials, so if a sale gets forced, you're negotiating from knowing your number, not guessing.
His own framework has three pillars: the business itself, your personal finances (how much you actually need to be okay), and your personal goals for what comes next. Miss any one of them, in his words, and "essentially everything kind of falls apart."
Every one of the 5 Ds gets more dangerous the more the business depends on one person. That's the same underlying issue whether you're worried about disability, a partner dispute, or just wanting to eventually sell on your own terms. The specifics differ across construction, healthcare, and professional services, but the exposure is the same. See how we work with your industry.
FAQ
What are the "5 Ds" in exit planning? Divorce, Disagreements between partners, Disruption from external shocks, Disability, and Death, the five events most likely to force an owner into an unplanned sale.
Which of the 5 Ds do owners plan for the least? Disability. Owners often carry life insurance but skip personal disability coverage, even though a long-term disability strains both personal finances and the business at the same time.
Why does disability insurance matter if the business keeps running without me? Because someone still has to be paid to cover your role, and you still need income to live on. Without disability coverage, owners often pull cash from the business to cover personal expenses right when the business can least afford it.
Do I need a buy-sell agreement if I trust my business partners? Yes. It isn't about distrust. It's a documented, funded plan for what happens on death, disability, or an unresolved disagreement, so a crisis doesn't turn into a legal fight on top of everything else.
How does a fractional CFO help with this kind of risk? By helping build the cash reserves, documentation, and financial visibility that let a business function without the owner at the center of every decision, which is the same work that makes a business more valuable and sellable on your own timeline.
Not sure how your business would hold up if one of the 5 Ds hit tomorrow? Talk to DAT Finance about building a business that doesn't depend entirely on you.