An Exit Is an Event. Exit Planning Is a Process.
A sale, succession, partner buyout or family transfer may happen at a specific point in time. Preparing for it can begin years earlier.
Time gives you the opportunity to address issues that may be difficult to change once a transaction is already underway, from owner dependency and key employees to business value, potential buyers and the structure of an eventual transition.
It also gives you something equally important: the ability to be prepared when an opportunity arrives before you expected it.
You don't need to know when you'll exit or exactly what that exit will look like to start preparing for it.
The Business
□ Could the business operate successfully without you?
□ Is the value of the business dependent on you, a few key employees or a small number of customers?
□ Do you know what factors could increase or decrease the value of your business?
□ If you have partners, is there a clear plan for how ownership eventually changes hands?
Your Personal Financial Readiness
□ Do you know how much you need from the business to become financially independent?
□ Are you building enough wealth outside the business?
□ Do you know where your income will come from after the business?
□ Would you have the financial flexibility to walk away from an offer that wasn't right for you?
The Transition
□ Have you considered who the likely buyer or successor could be?
□ Have you evaluated how taxes could affect what you ultimately keep?
□ Are your retirement, investment and estate plans prepared for a significant liquidity event?
□ If an unexpected offer arrived tomorrow, would you know whether you could afford to say yes?
Build a More Transferable Business
Identify areas that may affect business value, owner dependency, continuity and the ability of the company to operate beyond you.
Prepare Your Personal Financial Plan
Determine what you need from an eventual transition and coordinate your investments, retirement income, insurance, estate planning and tax-efficient strategies around the wealth you've built.
Prepare for the Transition
Work alongside your CPA, attorney, valuation professional, M&A advisor and other professionals to help coordinate the financial decisions before, during and after an eventual transaction.
Start Planning Before You're Ready to Exit.
More time can create more options.
1. Define What You Need
What does financial independence look like for you? How much income will you need? What role does the business need to play in getting you there?
2. Understand Where You Are
Look at your personal wealth, the role the business plays in your financial plan and the issues that could affect a future transition.
3. Build Toward the Transition
Establish priorities and coordinate with the professionals involved so you're preparing both the business and your personal financial life for what comes next.