Exit planning starts with Knowing Your Options. Many business owners think there are only two options: sell the company or keep on working. In fact, there are seven exit paths available including partial exits, which let you take some “chips off the table” now or transfer ownership interests in a very tax-efficient manner. Each exit path dictates a definitive course of action. Understanding the merits and implications of each option is the essential first step in exit planning.
The second step is Making A Plan. At the foundation of a comprehensive exit plan are well defined personal and corporate goals that guide the overall process. While the entrepreneurial spirit may be drawn to quickly moving into a transaction, business owners who exit wisely devote sufficient time and energy to planning the exit, preparing both the owner and the company for a transaction, and then executing the transaction in an orderly and time-efficient manner that minimizes surprises. While it is true that “time kills deals,” lack of preparation kills or weakens far more deals. A well constructed exit plan helps to ensure that the right deal gets done at the right time in the right way.
The third step is Building Your Team. Seven and eight figure exits are typically complex affairs requiring the expertise of several professional disciplines from the Legal and Financial fields as well as Specialists depending on the circumstances. The composition of the team depends heavily on the exit option that best satisfies the personal and corporate goals of the business owner and the exit type and exit strategy that will be executed. The most effective teams are those who work collaboratively keeping the best interest of the business owner always in the forefront.
The fourth step is Getting Prepared. The exit plan constructed in step #2 guides much of this effort. Action plans are developed with the exit team to prepare both the owner and the company for a transaction process and life after the transaction closes. The element of timing weighs large and while there are a lot of variables the owner and company can control, there are many other forces outside of their control that can have a substantial bearing – both favorable and unfavorable – on an exit.
The final step is Exiting Holistically. At the end of the day, what matters financially is not how much you get paid for your company, but how much you keep. Exit plans that are properly valued, structured, cost-effective, and tax-efficient put the most money in your pocket. Of equal importance is what an exit can do for you, your family, and people and causes you care about. A holistic exit combines financial security and resources with aspirational desires and fulfillment as you chart the next stage of your life.