Fundamentals of Exit Planning

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:

• 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.
• 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.
• Your Financial Plan – know how much your business is worth and how much you will need to live off of after you exit.
• 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.
• 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.

Your Business Continuity

In an ideal world, your business will continue to flourish long after you have exited. In reality, not everything works out accordingly. Having a solid plan for your business’s continuity after you are gone is very important. Multiple circumstances can arise that, without a sufficient plan, can leave your employees flailing. Exit planning from both the owner and those next in line are of the utmost importance because the lack of experience and understanding of how to handle the business should the owner suddenly die or become disabled can be detrimental to the owner’s family, and can possibly bankrupt the business. A buy-sell agreement is essential to the continuity of a business, but it is only one part of exit planning.

Common mistakes often include, but are not limited to: failing to deal with a financial continuity plan when a co-owner dies, failing to deal with the management or leadership of the business when the “leader” of the business dies, and failing to deal with financial, leadership, or business continuity when the sole owner of the business dies. Morbid as it may sound, we never know when an emergency will be thrown our way. Ideally, a business owner, especially a sole business owner, will have a pre-written continuity plan long before anything should happen. But life is uncertain, and being prepared for the unknown in the business world could make or break what is left of all of your hard work.

It is an excellent idea to be well prepared if such an occasion should arrive. Planning is meant to be something done before an exit, either an intentional or unintentional exit. Start planning now to avoid having you or your family watch your business suffer.

“What’s Next?” – Creating a Fulfilling Life After Retirement

As you get ready to ramp down from your full time business role, many start to ask the question “What’s next?” While everyone has ideas about how they would like to spend their next phase of life, the reality is that few actually know how their time will truly be spent. Generally speaking, most people want their lives to be purposeful and meaningful, and retirement is no different. Establishing a plan about the goals and aspirations you wish to reach during your golden years is a great place to start to help avoid the emotional loss most owners feel as they ramp down or exit their business. Sitting down and truly thinking of what you would like to do and what kind of an impact you want to make, is important to do well before you actually exit. Of course, our life priorities change with each life experience, and it may be hard to know exactly what we will want in the future, but creating a basic framework is important so you live the life you have dreamed of living.

According to multiple studies, most retirees are concerned first and foremost about having enough money to get them through their retirement in a joyous and comfortable nature. A study done by the Bureau of Labor, which was published by the Wall Street Journal in 2014, asked pre-retirement Boomers what their top concerns after retirement would be. Of course “having enough money” was at the top of everyone’s list, but after that came:

1. Health
2. My partner’s health
3. Will I need to work?
4. Where will I live?
5. Will I be bored?

The concerns are general, yes, but important to think about nonetheless. The second part of their survey asked what the vision of their post retired lives would look like. The top five came out to be – Joyous, Purposeful, Inspiring, Educational, and Strong. So, looking at the common concerns and aspirations, the question still begs to ask “What is next for you?”

Although most professionals look forward to retirement, the loss that comes with exiting a business can be traumatic. Careers give us a sense of self-worth and belonging in a community. Once you’ve left that ‘community’ of work, it is extremely important to continue to actively engage in some meaningful way. Without doing so, both mental and physical health may suffer. It’s easy to get stuck sleeping late and watching lots of TV. According to the Bureau of Labor survey, the most time consuming activities of the average retiree are sleeping, followed by watching TV/movies. Activities like eating, socializing, reading, cleaning, and exercising were significantly less time consuming on a daily basis. We cannot stress enough how important it is to stay active in your community, revisit or start new activities that are meaningful, and exercise.

Living a healthy, happy, and fulfilling life can be tricky at any age. If your top worry is your health, join a gym, start walking, take tennis lessons, explore different forms of exercising. If your top worry is boredom, identify your strengths and passions and network with people to find meaningful ways to contribute. If you are worried about losing your community connections, plan to travel, join a club, get together with colleagues over lunch or drinks. The possibilities for involvement and entertainment are endless! It really is just up to you to decide which would contribute to helping you feel happy, healthy, and fulfilled.