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Planning: The Key Term in ‘Exit Planning’

Strategic planning, business development, search for new markets and opportunities.

Exit planning is about much more than retirement. It’s a key aspect of strategic planning that sets end goals for your business and benchmarks for reaching those goals. You’ll need to analyze the legal, financial, and tax implications of your exit, while keeping your eye on the prize of maximizing value when you exit.

Successful exit planning demands preparation, as well as the involvement of the owner, management team, and staff. A strong exit plan uses the right team to support the owner as they move toward an exit. Perhaps most importantly, it prioritizes the owner’s values. Many exit plans aim to minimize taxes so they can protect the owner’s interests. The goal here is to ensure the owner ends up financially and emotionally ready to leave when the time comes. Here’s what you need to know about this important aspect of running a company.

The Difference Between Exit Planning and Succession Planning

Many owners think that exit and succession planning are the same. The difference is the focus. Exit planning prioritizes the owner’s needs, while succession planning is focused on the long-term success of the business. Sometimes these interests are in conflict, and an exit advisor can help owners balance the two competing needs.

Exit Planning Key Steps

The key steps of exit planning include:

  1. Establishing exit objectives. Every owner has their own exit goals. There’s no cookie-cutter approach here. Some hope to start another business, while others aim for an easy retirement. Knowing your goals can help you leverage opportunities to reduce taxes while improving cash flow.
  2. Establishing business value. You need to know how much your business is worth, and which valuation strategy is most appropriate for your company and your industry.
  3. Preparing for due diligence. You should have answers to the questions a buyer will ask well before due diligence begins. That means gathering financial documents and ensuring your forecasts and predictions are based on accurate information and reasonable models.
  4. Identifying exit options. Work with an exit advisor to assess the relative merits of each potential exit strategy. Shutting down the business is the fastest, easiest option, but means you won’t gain any revenue from a sale. Liquidating may be an option for a quick and easy sale. However, taxes tend to be higher. Selling offers the best path to cash, but requires significant planning and time. Some owners elect a family transfer or friendly buyout to sell their business, but this approach still requires significant planning and effort.
  5. Prepare for life after the sale. If you don’t know what’s next after you leave your business, you are more likely to struggle with leaving, and perhaps even inadvertently impact the sale.
  6. Preserve your values and your business. It’s important to profit from an exit, but if you want to protect your business, you need to get a great management team in place. An M&A advisor can help you ensure that the buyer preserves your company culture and values by selecting the right buyer and putting the right terms in the sale contract.
  7. Don’t forget about wealth and estate planning. Selling a business usually means you’re going to get a large chunk of cash. What are you going to do with that money, and how will you ensure that it lasts as long as you do? What should happen to your wealth when you die?

About Strategic M&A Advisors

Business sales come in all shapes and sizes. At Strategic M&A Advisors, we can help you determine the most advantageous option for selling your business. We handle all types of merger and acquisition transactions, from outright sales to investment options to grow your business. The first step is an evaluation of your business and goals to determine the best path to get the results you desire. If it is the right time to sell, we will assist you in finding vetted buyers or investors and getting the best price and terms for your transaction.

Posted on behalf of Strategic M&A Advisors

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Mississippi office

1062 Highland Colony Pkwy Suite 125
Ridgeland, MS 39157

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(601) 714-2777

(601) 675-4449

info@strategicmaadvisors.com

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8201 Cantrell Road, Suite 315
Little Rock, AR 72227

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(501) 588-8855

(601) 675-4449

info@strategicmaadvisors.com

Arkansas (501) 588-8855 Mississippi (601) 714-2777