Do I really need an Exit Plan?
“In this world nothing can be said to be certain, except death and taxes”. This quote has been widely attributed to Benjamin Franklin and has endured for hundreds of years. I would like to add a third certainty to this phrase; “at some point you WILL exit your business”.
It might be on your terms, it might not. Statistically, 50% of all businesses that are sold are unplanned sales. (see related post: The 5D’s). Sadly, 80% of all small businesses are liquidated rather than sold when the business owner retires or is no longer able to run the business. Why is this?
Most business owners view Exit Planning as a “future event” that will make it on to their to do list at some future date. These business owners fail to realize full value, if any for their business, fail to thrive post sale because of lack of planning and head into post business ownership life with a lot of unanswered questions.
Common reasons business owners cite for not engaging in the Exit Planning process is:
- Confidentiality, fear of Employees, Customers or Competitors finding out.
- It appears confusing and complicated.
- Not sure what their Exit options are.
- Exit Planning is a future event not something to be concerned with today.
- Not sure of the benefit of going through the process.
Why you should absolutely have an Exit Plan:
- Establish a realistic value of what your business is really worth.
- Identify opportunities to increase profitability and value.
- Gain a clear understanding of Exit Options and what the process entails.
- Begin to coordinate business value with personal financial requirements after you exit.
- Leave behind an enduring business and legacy for your employees, clients and customers.
A well-managed Exit Planning preparedness process will maintain confidentiality and answer the myriad of unanswered questions you have that make the process appear confusing and complicated. Once you embark on the process, you will develop the sense of urgency to have a proper plan in place. You will benefit by having an independent 3rd party determine the value of your business. Working through the Exit Planning process, you will develop action plans that when implemented will increase the value of your business, prepare the business to continue without you and put a plan in place for you to thrive after you exit your business. Upon completion of the Exit Planning process, you will have developed a solid plan that will provide financial and emotional security for you and your family.
The reality is, Exit Planning is not an event but a process. It is also a sound business strategy. It is a comprehensive roadmap to maximize value, provide financial security for you and your family and a successful exit from your business.
Frankly, there are steps you need to take before you can even make an intelligent decision on whether to sell your business.
It all starts with a business valuation. Understanding what your business is truly worth is an important first step in the Exit Planning process. Do you know how attractive your business is to a potential buyer? Is it in a position to transfer to a new owner? Is your business a value creator or a lifestyle business? What are your plans for after the business is sold? Are you ready for an Exit? How much money do you need to live on after you sell, and will the current business value support your lifestyle?
Can you see why Exit Planning is a strategic business process?
I will close this post with a mini-owner preparation checklist, excerpted from our Exit Planning Toolkit. If you cannot answer yes to all these questions, then you are not prepared for an unplanned event and are not properly protecting the value of your business.
You are prepared when you have:
1. Invested the time and are educated on the process of how to transition your business. You have discussed transitioning with your loved ones.
2. Your personal, financial, and business goals are aligned meaning they are defined, co-dependent and linked.
3. You understand the value of your business and the steps to take to maximize value.
4. You have established a transition advisory team.
5. You have created and reviewed with key advisors and family members a contingency plan which should include buy-sell instructions and specifics of what should happen if you could no longer operate the business.
Are you prepared to invest an hour of your time to learn how you can benefit from learning about how the Exit Planning process can guide and assist you, your business and your family? To schedule a no cost, no obligation email me at firstname.lastname@example.org.
In case you’re still not convinced, read the flowing article from Inc. Magazine: You Need to Get Serious About Creating a Strategic Succession Plan. Here’s Why