EXIT PLANNING PROCESS
EXIT PLANNING – Or How to Always Be Ready
Many business owners believe exit planning is an exercise they only do when it is time to sell the business. This could not be further from the truth. Exit planning is actually a way of operating the business so that it is always ready…… just in case. Just in case may be an unsolicited offer to purchase the business. If you received an offer today, would you know if it was a good offer or not? Is the business worth as much as it could be? Is the business as attractive as it could be?
Exit planning is a process whereby the business and the owner are analyzed to determine the state of exit readiness and attractiveness. The process evaluates where the business and owner are today and where they could/should be to maximize the value at the time of sale, and to streamline the sales process. Many owners equate business value with marketability. However, we often see businesses that are valuable and yet unsaleable (and vice versa). Through the exit planning process, we identify ways to increase both the value of the business and the marketability.
The process begins with determining the business value. During the process, certain risk factors are identified and a plan to address them is prepared. The Exit Planner works with the owner and other professionals to ensure the value of the business (and the owner’s interest) are protected from unexpected contingencies. These include the “dreaded Ds”. Divorce, dissenting shareholder actions, disgruntled employees, disease, death and (worse) disability. This usually requires the services of insurance professionals, estate and wealth planners, accountants and attorneys. If there are multiple shareholders, buy-sell agreements or cross-purchase agreements may be necessary.
The exit planning process can be relatively short (less than one year) or it may require several years if a management team needs to be put in place or there is a large gap between where the business is today and ideal business profile. The key is to always be prepared. That way, the owner will know if an offer is worth entertaining and is always protected against the unexpected. The process also allows the owner to work more on the business and less in the business – freeing up time to enjoy non-business activities.
If you would like to learn more about the exit planning process, please contact us at your convenience for a free consultation.
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