Whether you're a startup founder or a seasoned business owner, having a well-crafted exit plan is a strategic step to mitigate uncertainty and stress should the time come to step away from the business. Let’s explore why exit planning is crucial, what it entails, and how to approach it as part of successful business ownership.
What is an Exit Plan?
An exit plan begins the moment one enters a business. It is a roadmap towards effectively and efficiently exiting the business whether purposeful or not. It is customary to consider exit planning for retirement purposes; however, many business owners exit for other, unforeseen reasons such as a disability, divorce, or even death. Because we cannot always choose when and how to exit our business, we must plan for every possible outcome. The goal of an exit plan is to seamlessly transition into life after the business and ensure the owner is well positioned to maximize profits, minimize losses, and ensure sustainability. It's incredibly important for the departing owner to have an effective plan in place to ensure a certain lifestyle can be maintained and to preserve continuity.
The Importance of an Exit Team
As they say, 'it takes a village'. A properly planned exit from a business might include an exit team. This would consist of an exit advisor who acts as the quarterback of the plan, a mergers and acquisitions attorney who can draft the necessary documents, investment bankers if the plan is to sell to an outsider, and a CPA who is well versed in the tax planning process around exiting a business. Each member of the team plays a vital role in assuring the success of the plan and helping to overcome any obstacles along the way. To better understand the role of a team conceptually, let’s imagine a family business owner who decides to sell his company to a larger corporation. Going it alone, the owner may be at a disadvantage to secure an optimal agreement. By assembling a skilled exit team, he is more likely to navigate complex negotiations, optimize his tax position, and lock in a deal at or above valuation expectations.
Tailor the Plan to Client Needs
Everyone is different. And everyone's situation is different. A successful exit is one that meets the needs of the departing owner. This may be different from one owner to the next. Some may look to simply exit, but not sell, and collect a paycheck for life. Some may look to maximize the sale price by selling to a third party and walking away. Others will have a desire to keep the business in the family or with a long-standing key employee so they can feel confident the values of the business hold on through the generations.
As an example, let’s take the owners of a thriving family restaurant chain and their gradual exit strategy. It consists of their children taking over key roles in the business while simultaneously creating a profit-sharing plan for long-term employees. This approach allows them to preserve their legacy and create a stable leadership transition. Each business owner has a unique vision of success. That’s why each exit plan could benefit from a tailored client strategy.
Did this scenario resonate with you? Maybe an exit planning conversation is in order. If you’re ready, let’s chat.
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Enter into the Exit Wisely
Exit planning is not just about preparing for the end—it's about securing the future and protecting a legacy. By starting early, assembling an experienced team, and tailoring a strategy to the given business owner, an exit plan can help ensure a smooth transition that benefits the owner, the business, and all stakeholders involved. It is important to remember that a great time to plan an exit is now, regardless of one’s timeline to leave.
7024190.1 Exp. 09/26