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An exit plan is a comprehensive road map that helps business owners successfully exit a privately held business. An exit plan asks and answers all of the critical questions that you must consider when exiting your company. It covers all the personal, financial, legal, tax and estate planning areas related to the exit. It also helps you consider various exit options, evaluate the pros and cons of each option and select the right one for you.
An exit plan is like a business plan, but focused on your exit. As a business owner, you wear two hats: a manager hat and an owner (or shareholder) hat.
As a manager, you prepare and manage your business according to a business plan. You get a salary and benefits for your work. As an owner, you are focused on building the value of your business knowing that you will realize that value once you sell the business. As an owner you may receive some compensation in the form of dividends along the way, but your biggest pay-out will come, when you sell your business. An exit plan helps you plan for this event.
A well-executed exit plan offers you the following advantages:
Control of your own destiny – It helps you set goals: to whom you should transfer the business, when you should exit and how to realize the desired value of your business.
Value maximization – It helps you focus on the key value drivers of the business and build its value to the desired level, while structuring the business to limit your taxes thus allowing you to keep the maximum amount of dollars.
Higher likelihood of success – The sheer fact of setting goals and a developing a plan to reach these goals dramatically increases your chances to succeed. After all, there is a saying: “failing to plan is planning to fail.”
Peace of mind for you – It creates peace of mind knowing that you have taken the necessary steps to ensure that your goals can be fulfilled.
Peace of mind for your loved ones – They know that you have made the arrangements to avoid leaving them with a business they cannot handle, if you are no longer able to manage it for reasons beyond your control.
All business owners should have an exit plan. When you get into a business, you should already know what you want to get out of the business. It is no coincidence that venture capitalists always ask entrepreneurs about their exit strategy before considering an investment.
If you don’t have an exit plan, it is probably time to start thinking about one. You should formalize an exit plan ideally 3 to 5 years before your actual exit. This generally leaves enough time to further build the value of your business, especially if is not yet at the desired value level.
Not everyone is ready for a complete exit from their business but prefer to spend more time with their family or have other business interests. For those of you we have a solution, our Virtual CEO Services.
If you want to learn more about exit planning, please contact us to schedule a complimentary no-obligation consultation.
BUSINESS SALES & ACQUISITIONS FOR MIDDLE-MARKET COMPANIES