We refer to it in the exit planning trade as the "perpetual five-year exit plan". When asking a business owner when they plan to exit their business, the following is a fairly common response: "Not sure but probably about five years from now..." And it’s not unusual to get the same response year after year from the same owner. There can be numerous and varied reasons for the response, but a lack of planning is often primary.
The problem is that if you don't begin planning now, you and your business may not be ready for you to exit in five years, and it could end up being necessary for you to plan and wait for another five years in order to attain your goals.
In our effort to help you avoid the perpetual five-year plan, the following is our "2021 Exit Planning To-Do List" we posted at the end of last year to help you get started.
DECIDE WHERE YOU WANT TO GO. Establish Clear Goals and Objectives for Exit and Your Life After Exit.
When do you want to leave the business? Whom do you wish to transfer/sell the business to?
What are your values-based and legacy exit goals?
What is your post-exit "life plan"? Business owners can often regret leaving when lacking a plan for life that replaces the sense of purpose and meaning they experienced in building their business.
Update your Personal Financial Plan. Find out how much $$$$ you will need post-exit to do all you want to do. Is there a gap?
ASSESS WHERE YOU ARE. Without Accurate Data All Planning Becomes Meaningless.
Get an accurate Business Valuation. If the business is your largest asset shouldn't you know what it really is worth to potential buyers?
Assess your business Value-Drivers and areas of Risk.
Review your Business Continuity Plan for life transitions and unexpected death or disability. Co-Owners would include a review of their Buy-Sell Agreement to ensure alignment with current goals of all owners.
Review Estate Plan to ensure alignment with exit goals.
DESIGN AND IMPLEMENT A PLAN. Build Transferable Value and Enjoy a Future Exit On Your Own Terms and Conditions.
Which Exit Route will best accomplish your goals? Sale to Third-Party | Sale to Insiders | Transfer to Family Members | Sale to ESOP | Absentee Owner.
Focus on growth and profitability today. At the core of tomorrow's successful exit plan is today's profitability and plan for growth.
Strengthen business value drivers.
Update strategic financial plan for the business.
Do you have the right Team of Experienced Advisors for plan design and implementation?
Who will Manage the Exit Planning Project?
Following are some easy next steps:
