Planning for Your Exit Before You Plan on Exiting

It may be years before you are ready to leave your business. You may absolutely love working, and can’t imagine retiring any time soon. Or maybe you want to exit, but you don’t have the financial resources to leave the business just yet. No matter which situation you find yourself in, it is inevitable that you will leave one day. Being prepared ahead of time is crucial to a successful exit from your business.

            Successful owners start thinking about their exit plan now -- long before they plan on actually exiting.  They start by building a successful business that has value to a buyer now! You can build your business two ways: One is defensive and one is offensive. Using a mixture of them both will enhance the quality of your business and ensure that your eventual exit will be a successful one.

Defensive: Although you may have no intention of exiting anytime soon, it is extremely important to “go on the defensive” and be prepared to exit at any time. You never know what the future will hold.

·         The market could take a drastic turn for the better -- or the worse, and it may be time to get out.

·         An offer you cannot pass up may come along unexpectedly.

·         Or in extreme cases, you could fall ill or disabled and unable to run the business

Sadly, we don’t live forever and none of us know when we are going to die. Knowing that your company will be able to function without you in the event of an emergency is important to saving the integrity of the business you worked so hard to build.

Offensive: “Offensively” speaking, you want your company to be one that thrives for a long time, especially after you exit. To ensure that:

·         Put strong systems in place – financial, operational, sales, etc..

·         Make strategic business decisions today. You’ll reduce risks and prepare your business to be more valuable before you leave.

·         Build a strong management team

·         Become less financially dependent on your business in the final years leading up to your exit are important things you can do to build a vibrant saleable business that people will want to buy.

·         Look at the areas in your business that need improvement. Weak links could be detrimental to a profitable sale, so fix them now.

·         Assess your strengths and build on them to increase the value of your company.

Get ahead of the game by planning for your exit now. There is no harm in being prepared many years in advance.

Learning that building a better company today and exit planning are the same thing will ensure that your exit will be a successful one.

Fundamentals of Exit Planning

Establishing a well thought out exit plan is crucial to the successful transfer of your business, without sacrificing all of the hard work and financial success you’ve gained over the years. It is an inevitable fact that all owners will leave their business someday. Preparing yourself, your company, and the new owner is essential to leaving behind a successful business that will continue to flourish in the future.

Many business owners don’t know where to begin. Some business owners worry whether they will have enough money to last them through retirement, while others are concerned with the integrity of their business. Either way, having a strong exit plan before you are ready to leave the company will help ensure that the business will be able to go on successfully without you.

A few key steps are essential a well thought out exit plan. Begin by asking yourself the following questions: (possible resources are in parentheses)

-          Do you or will you have enough money to live comfortably? (financial advisor)

-          How much is your business worth right now?  (business valuation expert)

-          Have you started taking steps to increase the value of your company? (Investment banker and The Leadership & Legacy Group)

-          Do you plan on staying involved or walking away without responsibilities? (you)

-          Are you planning to sell to an inside or outside buyer? (you and broker/investment banker)

-          Do you have a business continuity plan should something happen to you? (you and The Leadership & Legacy Group)

-          Can your management team run this business without you? (The Leadership & Legacy Group)

-          Do you know what you plan to do post-business? (The Leadership & Legacy Group)

Honestly answering these questions, either by yourself or with the right mix of resources, will help you determine the necessary steps it will take to make a successful exit plan.

Important Considerations For Successful Exit Planning

Timeline: There is no better time than right now to start planning. But if you are looking for a quick exit, you may need to rethink. Exiting quickly will likely make achieving your goals more difficult. Building buyer value into the business before you actually decide to exit the business will likely increase your financial return.

Planning: It is smart to hire a reputable business advisor, broker, or investment banker to assist with the transition. There are so many complicated tax laws, insurance and estate planning vehicles and more, that trying to do everything yourself could seriously hurt your end of the sale.

Flexibility: Your exit plan must be flexible enough to navigate a changing economy, industry changes, staffing changes, and more. Most owners want to sell their business for a good price, or pass it down to a willing and responsible heir or both! They don’t want to liquidate the company.

The PLAN: Your exit plan should be a combination of personal, financial, and business goals and objectives that create the outcome you most want. It is important to look at the following areas to ensure a successful exit plan:

1.                            Your Business Plan – focus on the future even if you’re not going to be a part of that future business. Making both your company and your key employees more valuable is a major asset to the sale of your business.

2.                            Your Exit Plan – it is so important to have a written continuity plan in case something should suddenly happen to you. Also, prepping your key employees for your inevitable exit helps make the transition much smoother.

3.                            Your Financial Plan – know how much your business is worth and how much you will need to live off of after you exit.

4.                            Your Estate Plan – make sure to look at all aspects of your wealth, not just your business. Protect the wealth that you depend on by being proactive about the assets you have other than your company before the transition.

5.                            Your Team Planning – developing your team to prepare them to run your company profitably and sustainably will give you the peace of mind that your company will be run successfully after your exit.

As unsettling as exiting the business that you have poured your heart and soul into for many years can be, having the right plan to be able to successfully exit will not only make you feel better, it is necessary for the future of your business. Using the tips discussed in this post will help you organize your ideas about exiting, and get you one step closer to the successful exit you have dreamed of.

I'm Stuck! Six Ways to Release the Glue

We feel stuck for many different reasons, but when you boil it all down, most ‘stuckness’ comes down to some form of fear. It might look like overwhelm or denial or uncertainty, but at the root, it’s a form of fear. We are afraid. We don’t like to talk about being afraid, so we make excuses to externalize our fear. It’s not the right time to act. We haven’t figured out our plan yet. We need to gather more data. The economy is weak. Blah blah blah. These excuses serve to keep us even more ‘stuck’ because they allow us to justify why we are not acting. The problem… we are still stuck. If you are stuck, try one of the following actions and see if it helps you take even a baby step forward. Three baby steps give you one full step, so let’s get started:

1.       Remind yourself of what the compelling opportunity is if you were to move forward. What have you got to gain?

2.       Evaluate the real consequences of taking action now. It might not be as risky as you think.

3.       Brainstorm alternatives that reduce the risk – even crazy ones can show you a path forward, or can demonstrate that your current situation isn’t really that risky.

4.      Talk to someone who has taken this risk or a similar one and find out how they did it. Maybe you can apply some of their lessons learned to your situation, or maybe you can increase your confidence in yourself.

5.      Ground yourself in the wisdom and experience you bring and remind yourself that you have overcome many challenges before. Tap into the strengths that enabled you to do those and you may find they apply here too. 

6.      Go away. Really! Get out of your current environment and get some fresh perspective. Stop thinking about where you are stuck and immerse yourself somewhere new and different. Even for an afternoon. Get a cup of coffee downtown if you work in the burbs. Get a cup of coffee in the burbs if you work downtown.