A Road Map to Exit Planning
A customized comprehensive approach to designing and implementing a business owner's successful exit is essential for success.
There are many tools available to help individuals get into business, but few that help them get out. Exit planning uses an owner's unique personal objectives to convert his or her current reality into the desired outcome.
Exit planning helps maximize the financial return, minimize tax liability, plan for contingencies, and increase the likelihood of a successful transfer of the business.
Exit planning encompasses several steps which results in the creation and execution of a strategy that allows business owners to exit their businesses on their own terms and conditions.
All owners will one day exit their companies and all want that exit to be on their terms. This article introduces steps in The Seven Step Exit Planning Process™ and describes the features of an Exit Plan that make a successful business exit more likely. These include: 1) making and executing a plan well before the desired exit date, 2) putting in place measurable goals, but retaining flexibility; and 3) using a proven process.
You may be able to envision your life beyond business ownership, but you may not have a clear picture of how best to "leave your business in style."
If forced by circumstances beyond your control, you could likely exit your business within a year. Some business owners are here today and – literally – gone tomorrow, but usually not by their own choice. But leaving in style – with adequate cash and having achieved whatever other goals you have set— that takes time, far more than most owners expect. How much time? There are several Exit Planning activities that come together to create an owner’s Exit Planning timeline.
The starting point for any plan is to define its goals. In Step One, owners answer three questions: 1) How much cash do they need to exit in style? 2) When do they want to exit? and 3) Whom do they want to succeed them? A case study illustrates why setting objectives, understanding how one objective affects another, creating a plan, and taking action to reach goals are critical components of a successful exit.
Unless you set and prioritize your exit goals or objectives, you may have too many, or they might conflict, but in either case you may not make much headway. Prioritizing your objectives will help you choose your overall path and gives you a framework for decision making.
Three former owners answer the question, “What is life like after you leave your company?” Each exited in a different way and each crafted a unique post-business life, but all agree that there’s more to life than running a successful company.
This issue is perfect for owners who object to Exit Planning because they believe they can’t sell their companies today or anytime soon. A case study describes an owner who realized—only after being approached and rejected by a buyer—that his failure to create a management team and growth plan, to install comprehensive systems, and to increase cash flow left him little to sell. This article encourages owners to start working now to make their businesses attractive to buyers.