For most entrepreneurs, their business represents a lifetime of hard work, dedication and sacrifice. Building a successful company is extremely challenging, but also incredibly rewarding. However, many business owners find themselves so caught up with day to day operations, that they fail to prepare a plan for exiting their business. The Business Enterprise Institute estimates that a successful business exit plan takes between 3 and 10 years to successfully complete. Many owners have not established a plan at all. This often results in highly profitable businesses being liquidated or closed, leaving potentially millions of dollars on the table.
A Forbes article titled, “What’s In A Good Exit Plan?”, by John Brown poses seven questions based on the Business Enterprise Institute’s exit planning process:
Step One: Setting Exit Objectives: Do you know your retirement goals and what it will take—in cash—to reach them?
Step Two: Determining Business Value: Do you know what your business is worth today, in cash?
Step Three: Increasing Business Value: Have you identified the best ways to increase your company’s value and cash flow?
Step Four: Sale To A Third Party: Do you know how to sell your business to a third party for maximum dollars and minimum taxation?
(or)
Step Five: Transfer Your Business To Insiders: Do you know how to transfer your business to insiders (family members, co-owners or employees) for cash rather than give it away?
Step Six: Business Continuity Planning: Do you have a continuity plan to protect your business should you die or become disabled prior to your exit?
Step Seven: Wealth and Estate Planning: Do you have a plan to assure your family’s financial security should you die or become disabled?
In my view, having an exit plan is a critical part of any business plan because like it or not, nobody can or should work forever.
Sources:
https://www.forbes.com/sites/johnbrown/2017/05/04/whats-in-a-good-exit-plan/#1f9b0341904a
https://www.exitplanning.com/solutions/planning/exit-planning-process