Whether you address it from the outset of your business or later down the road, every business owner needs an exit plan. Some business owners intend to sell the business for maximum profit, some want to sell it to successors or employees, others want to go public, and still others intend to keep it in the family.
In each case, taking the time to prepare the exit plan now will allow you, the owner to reach your ultimate goal with a comprehensive 360 view with all the pieces in place. Business-owner exit planning should begin five to 10 years before you want to retire or pass your business to your chosen successors.
Unfortunately, 95% of all business owners NEVER do exit planning. And they wonder why they end up with nothing when, on the day they get fed up and want to sell it as fast as they can; they accept the first offer they receive.
That doesn’t have to be you.
Plenty of expert advisors will tell you that exit planning starts with your exit objectives and the retirement income you want to have – because that’s where they start working with clients.
There are a few other pieces you need to define BEFORE you can answer those two questions. They are core pieces of having a strong business foundation long before you consider implementing any exit strategy.
Before you can define your exit objectives, you must identify:
- Your long-term ultimate goals for the business – with you or without you
- How you want to secure your legacy now, before you leave
- How you want to ensure your dynasty once you exit the business
- Who you want to take leadership of your business (as owner, non-owner manager, or transition staff)
what still needs to be done in terms of business planning, contingency planning, and succession planning to position the business for maximum growth and value – and work on that planning first, as a prerequisite to detailed exit planning.
You may have multiple exit objectives. Be sure they are consistent. Then prioritize the outcomes. Selling fast, selling for maximum value and selling for 100% cash up front can be conflicting goals.
As part of your transition planning process, when you define what your next step will be after you exit, you’ll get a better idea of how much funding you need: for a new venture, to invest or for philanthropy; not just your personal retirement income. You’ll also get clear on your goal timeline and your options for what format the transaction can take.
The lifestyle you intend to pursue after the exit may expand or restrict the exit options you consider.
You don’t have to have a plan today. You do have to start planning today.
The more lead time you invest in building a strong business to achieve your ultimate goals, the more fruitful and fulfilling will be the exit strategy you can choose to implement.