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Planning Your Exit

Written by: Kenneth C. Halkin

Article Overview: This article emphasizes the importance of advanced exit planning for business owners and offers a practical guide to the steps for sound exit planning.

Planning Your Exit

It is the responsibility of every business owner to plan for the day that they will no longer be involved in the day-to-day running of their business. Business owners owe this to themselves, their families, their employees, their customers, their investors and partners and even their major suppliers and other business affiliates. Such planning must include both a target exit timeframe and outcome as well as various contingencies for unplanned circumstances such as death and disability.

There are many options to consider when it comes to exit planning. Here are a few of the most common choices:

* Sell the business to an outside business or individual.

* Sell to one or more employees.

* Sell to a family member.

* Gift to a family member or other individual.

* Continue to own all or part of the business and hire or promote somebody to run it.

* Sell the business operations but continue to own and lease the real-estate.

* Liquidate the assets and close the business.

There are multiple variations to each of these options. Before choosing any of these options one should consider all of the realistic options available to them.

The process should begin with the owners vision for the business and his/her vision for their own future, beyond the business. Developing a clear vision is usually the owner’s first major obstacle. Many business owners have a hard time seeing beyond the next payroll or payables cycle. For those who struggle with this, a well qualified Life Coach may be able to help.

Once you have a clear vision and goals for your post-retirement life, you will need to translate this vision into personal financial goals and strategies so that you can determine what role your business will need to play in your overall financial plan. This is a good time to bring your personal financial advisor into the discussion.

You will also need to consider your overall estate plan. This will require communicating with you’re your Accountant and the Attorney that you use for estate planning purposes.

The steps, up to this point, will help you to sort out and evaluate the above listed options. Once you have selected the option that best suits your desired post-retirement life-style and estate plan, its time to develop or update your business plan to support and tie into your personal goals.

In some cases you will be striving to maximize the value of your business as of some future point of sale. In other cases you will be focusing more on choosing and grooming a successor. In any case, there will be goals and objectives to be achieved which must be clearly identified in your long-term business plan and supported by more detailed short-term or annual tactical plans.

Whether or not you are trying to maximize the value for sale, knowing the value of the business now and being able to measure the value, going forward, is important to you, your heirs, your accountant and to the IRS. While there are rules of thumb that are typically used in various industries and while it is true that ultimately a business is only worth what somebody is willing to pay, having an objective professional appraisal of the value of your business is important and often necessary.

Planning ahead does not guarantee success but it most definitely improves your odds. On the other hand, failure to plan very often leads to disastrous results. I’ve seen it happen far too often. From the business owner who invests 30 years in building a business that then has no market value when they are ready to retire, to the owner that dies unexpectedly with no plan for the ownership and management of the company following their death, there are countless tragic stories that I could share. The important thing to remember is that it is never too soon to start planning your exit and if you are reading this article, it is probably not too late.

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Article Tags: business advice, business news, Exit Planning, Succession Planning



Related Forum Posts
Re: How do you make the most of your day? - Planning, To Do lists, and deadlines all help me. Also being self critical of my own time management helps me raise the bar. I still check email too often though.
Re: Success - I think it was Gary Player who said the harder I practice the luckier I become when it came to his success as a world class golfer. Planning and dedication to a task can make all the difference between success and failure. MichelleJ
Question: What has been your biggest business challenge? - Regardless of the industry they may be in, it seems all small business owners and entrepreneurs face similar key challenges in growing their business and becoming as profitable as they would like. These can be grouped into the categories of "Time", "Team", "Money", and "Exit Strategy". What has been your most significant challenge, the one that seems to be your biggest hurdle to moving forward and achieving the level of business success (however you define that) that you would like to? If you could have one issue solved in your business, what would that be? Your insights are invaluable and I appreciate your honesty. Regards, Gavin
Re: Quote of the Day - "If you hesitate, some bolder hand will s - Excellent quote, Evan. This reminds me of the saying, "The early bird catches the worm." It's important to act on impulses, rather than hesitate and plan. Planning isn't a bad thing and is warranted in certain cases, but those who act quickly will get a step ahead of the competition.
Nice List - Nice list, and I agree with everything you all have added! Planning is the biggest one of all! Look at everything from every aspect possible, and then ask others to look at it as well. It's extremely important that you consider everything before jumping into things, and it goes so much smoother! Also, some young entrepreneurs tend to have an unrealistic mindset (I can sell 4000 of this product in my first week!). Make sure you know what you're getting into, and don't expect something that won't ever happen. ~Marie


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