Establishing a well thought out exit plan is crucial to the successful transfer of your business, without sacrificing all of the hard work and financial success you’ve gained over the years. It is an inevitable fact that all owners will leave their business someday. Preparing yourself, your company, and the new owner is essential to leaving behind a successful business that will continue to flourish in the future.
Many business owners don’t know where to begin. Some business owners worry whether they will have enough money to last them through retirement, while others are concerned with the integrity of their business. Either way, having a strong exit plan before you are ready to leave the company will help ensure that the business will be able to go on successfully without you.
A few key steps are essential a well thought out exit plan. Begin by asking yourself the following questions: (possible resources are in parentheses)
- Do you or will you have enough money to live comfortably? (financial advisor)
- How much is your business worth right now? (business valuation expert)
- Have you started taking steps to increase the value of your company? (Investment banker and The Leadership & Legacy Group)
- Do you plan on staying involved or walking away without responsibilities? (you)
- Are you planning to sell to an inside or outside buyer? (you and broker/investment banker)
- Do you have a business continuity plan should something happen to you? (you and The Leadership & Legacy Group)
- Can your management team run this business without you? (The Leadership & Legacy Group)
- Do you know what you plan to do post-business? (The Leadership & Legacy Group)
Honestly answering these questions, either by yourself or with the right mix of resources, will help you determine the necessary steps it will take to make a successful exit plan.
Important Considerations For Successful Exit Planning
Timeline: There is no better time than right now to start planning. But if you are looking for a quick exit, you may need to rethink. Exiting quickly will likely make achieving your goals more difficult. Building buyer value into the business before you actually decide to exit the business will likely increase your financial return.
Planning: It is smart to hire a reputable business advisor, broker, or investment banker to assist with the transition. There are so many complicated tax laws, insurance and estate planning vehicles and more, that trying to do everything yourself could seriously hurt your end of the sale.
Flexibility: Your exit plan must be flexible enough to navigate a changing economy, industry changes, staffing changes, and more. Most owners want to sell their business for a good price, or pass it down to a willing and responsible heir or both! They don’t want to liquidate the company.
The PLAN: Your exit plan should be a combination of personal, financial, and business goals and objectives that create the outcome you most want. It is important to look at the following areas to ensure a successful exit plan:
1. Your Business Plan – focus on the future even if you’re not going to be a part of that future business. Making both your company and your key employees more valuable is a major asset to the sale of your business.
2. Your Exit Plan – it is so important to have a written continuity plan in case something should suddenly happen to you. Also, prepping your key employees for your inevitable exit helps make the transition much smoother.
3. Your Financial Plan – know how much your business is worth and how much you will need to live off of after you exit.
4. Your Estate Plan – make sure to look at all aspects of your wealth, not just your business. Protect the wealth that you depend on by being proactive about the assets you have other than your company before the transition.
5. Your Team Planning – developing your team to prepare them to run your company profitably and sustainably will give you the peace of mind that your company will be run successfully after your exit.
As unsettling as exiting the business that you have poured your heart and soul into for many years can be, having the right plan to be able to successfully exit will not only make you feel better, it is necessary for the future of your business. Using the tips discussed in this post will help you organize your ideas about exiting, and get you one step closer to the successful exit you have dreamed of.