The Exit Planning Roadmap: 7 Steps to a Smart Departure

How long have you spent building your business? Some people spend years just thinking about their business, before there’s even a business to think about. Others just start on a whim and learn by trial and error, adapting as they go.

In either case, it’s likely that you’ve spent countless hours, or even countless years, dedicating yourself to growing your business. Sadly, with so much time, energy, and focus spent on growing your business, you probably haven’t spent much time planning for what’s really important.

How will you leave your business when the time comes? Will your business carry on after you leave, or will it fade into a distant memory? What will you do afterward, how will you maintain a sense of purpose and direction?

You’ve probably asked yourself some of these same questions. Maybe late at night when you can’t sleep because your brain is running in overdrive. Maybe these questions scare you, so you push these thoughts to the back of your mind. But that won’t make them go away. 

These questions need to be addressed, and they need to be answered. The answers don’t necessarily need to be permanent, but there should at least be an outline or plan in place. This is where exit planning comes into play.

What Is Exit Planning?

Exit planning is the process of planning for your departure from your business. It’s not just about succession planning – it’s an all-encompassing process designed to prepare your business, your personal finances, and your mentality for your eventual transition away from your business.

Think of it as your roadmap, or GPS, to your destination. The initial plan is optimized based on current conditions and expectations, but it can be easily adjusted and manipulated if you need to add some stops along the way, or if any unexpected “road closures” or other events pop up.

When Should I Start My Exit Planning?

It’s never too early to start exit planning. The best time to start is typically when you’re 5 – 10 years from your desired exit time but starting earlier can be beneficial. This way, you’ll have at least a basic plan in place in case something unexpected happens.

It takes time to formulate a good exit plan, and even longer to implement the optimization strategies. When done correctly, a good exit plan can:

• Help maximize the value of your business
• Efficiently structure the sale, transfer, or dissolution of your business
• Help minimize taxes and fees
• Help protect your family and your employees
• Help provide income for your retirement or other endeavors

The Roadmap: 7 Steps to a Smart Departure

1. Define Your Personal and Financial Goals – Exit planning is as much about you as it is about your business. Your exit plan is unique to you and is based on your goals and objectives. Consider the following questions:
   1. How much income or money will you need when you exit the business?
   2. Do you want a clean break, a gradual separation, or do you want to keep limited involvement?

   3. What kind of legacy do you want to leave for your family or for the community?

       

2. Get a Preliminary Business Valuation – It’s imperative to know where you currently stand before we can help determine the optimal path forward. A formal business valuation will help set a baseline, identify opportunity areas, and help forecast a sale price.

    

3. Create a Value Acceleration Plan – This is to help increase the value of your business to help you meet your future objectives and make your business more attractive to future buyers. Look for ways to reduce your business’s dependency on you, increase revenue, improve systems and processes, and diversify and expand your client base.

    

4. Determine Your Ideal Exit Strategy – There are various ways to exit your business. Each one has different planning needs and tax implications, as well as different income potential. Maybe you want a family member or employee to take over? Maybe you want to sell the business to a third party, or to one or more employees? Maybe you just want to close shop and walk away? There’s no right choice for everyone, just what’s right for you.

    

5. Work With a Team of Professionals – Optimal exit planning is a very involved process. It’s imperative to work with professionals who understand all the nuances and can help you navigate the challenges and make the most informed decisions. This could include your financial planner, CPA or tax professional, business broker, and various attorneys. Having a team that’s willing and able to work together to help you navigate this process can be tremendously beneficial. 

    

6. Plan for Life After Your Exit – Your business has been your livelihood and a large portion of your identity. Stepping away can be an incredible emotional challenge. Take the time to put some serious thought into this new chapter of your life. What will you do next? What does retirement mean to you? How will you spend your time, and how will you continue to socialize and find meaning and purpose in life?

    

7. Implement and Monitor the Plan – Now it’s time to take action and implement your plan. Remember, this is a marathon, not a sprint. Monitor your business performance and progress throughout the process and review your timeline and goals regularly. Market conditions, business performance, and your goals and objectives will likely change over time. It’s important to update your plan as needed to ensure it continues to align with your objectives and timeline.

Exit With Confidence

You’ve put in the time, energy, and dedication required to start and grow your business. You’ve made sacrifices that few can understand, and even fewer will ever realize. Don’t leave your exit strategy up to chance.

Start your exit planning strategy today, so you can take steps to maximize the reward for all the effort you’ve poured into your business. Whether you’re 2 years or 15 years from your ideal timeline, planning ahead puts you in control of your financial future, and helps protect everything you’ve worked so hard to build.