As a business owner, it’s imperative to you and your company’s future to have a detailed exit plan in place. Whether you’re planning to sell it to a stranger, employee or transition it to a family member, the earlier you begin thinking about it, the smoother the transition will be.
If exit planning seems like a daunting task, or you’re just not sure where to start, try asking yourself these seven questions.
- What is my business worth? The entirety of your exit plan rests on the answer to this question. Make sure you’re enlisting the help of an accountant or business broker to get an accurate business valuation.
- When do I want to sell my business? Hopefully, your answer to this question is at least five years from now. Exiting planning and preparing your business for sale are not areas you should be cutting corners. The more time you give yourself, the more control you’ll have over the details of the transaction.
- What are my retirement goals and what will it take to reach them? If your retirement is being solely funded by the sale of your business, then your options for whom you’re selling to and how you’re getting paid will narrow. If your retirement fund is more diversified, then you’ll likely have more flexibility with this transaction.
- Who do I want to take over my business? Perhaps this is a family member, co-owner or current employee. If so, have you had this discussion with them? Will you retain any ownership interest if this is the case? Or maybe you’re hoping to sell to a third-party in which you’ll need a strong transition plan in place.
- How do tax laws affect my exit plan? In order to enjoy the maximum possible financial gain from selling your business, you need to know how taxes will play a role in the transaction. These laws will differ depending on your answer to question four.
- Can my company operate without me? As you begin the exit planning process, it’s important to start shifting the mentality and responsibilities of your employees to be able to continue without your leadership. The longer you have to transition yourself out, the better this process will be. This may also be a good time to consider a continuity plan in the event that something happens to you unexpectedly.
- Who should I enlist in this process? You’ve likely never exited a business before, and if you have, chances are the circumstances were wildly different. Exit planning should not be handled alone. Engage the help and support of your family, your business advisors and even professionals who specialize in this area.
The Bottom Line
Exit planning is a complex process with many things to take into consideration. For a successful transaction, it’s critical to start preparing early and asking yourself some of these tough questions.