facebook twitter instagram linkedin google youtube vimeo tumblr yelp rss email podcast phone blog search brokercheck brokercheck Play Pause
The Ultimate Guide to Business Exit Planning: Secure Your Future Today Thumbnail

The Ultimate Guide to Business Exit Planning: Secure Your Future Today

What is Exit Planning?

Exit planning is a strategy that allows business owners to leave their businesses when they want, for the money they need, and to whoever they choose to sell it to. Chris Snider, CEO of the Exit Planning Institute, describes it best: “Exit Planning is simply good business strategy.” When you implement these strategies, your business becomes more efficient. You'll start building systems, delegating more, and documenting your processes.

Why Focus on Exit Planning Now?

Even if you have no intention of leaving, retiring, or exiting your business for the next 10+ years, you should still focus on exit planning. By driving the value of your company up and integrating your personal and financial objectives, you'll have lots of options to exit on your own timeline down the road.

The Three Essential Components of Exit Planning

To successfully transition your business, owners need to address three key areas:

  • Strategy to Maximize Transferable Value
  • Written Personal Financial Plan
  • Written Life After Business Plan

Strategy to Maximize Transferable Value

First, you’ll need a market valuation of your business to understand your starting point. This is not an official business valuation but rather what a willing buyer would pay a willing seller. If your current advisor doesn’t know about exit planning, consider finding a more qualified advisor. This will be one of the most significant liquidity events in your life, so getting it right is crucial.

Business Attractiveness and Exit Readiness

Think of business attractiveness from a buyer's perspective—how appealing is your business from the outside? Exit readiness looks at how prepared you and your business are for the transition. By analyzing operations, management, sales, customers, and other areas, you can identify gaps and areas for improvement. As you address these, your business becomes more attractive and valuable.

For example, I worked with a business where the CEO was the top salesperson. To ensure the business's continued success post-exit, we implemented a sales training program and hired new sales reps. Documenting your knowledge and transferring it to your team can significantly increase your business’s value.

Personal Financial Plan

Just like planning a trip, creating a personal financial plan involves understanding your current financial situation, setting future goals, and mapping out how to achieve them. Questions to address include:

  • How much do I need to support my lifestyle?
  • Do I depend on income from the business?
  • How much does my business need to sell for to sustain my desired lifestyle post-sale?

Taking a holistic approach ensures you have a clear path to financial security.

Life After Business Plan

The third leg of the stool is a written plan for your life after exiting your business. This aspect is often neglected but crucial. It's about envisioning your future and creating a blueprint for your personal goals and legacy.

Some business owners struggle with this because their identity is tied to the business. However, knowing what brings you joy and fulfillment outside of work is essential. Whether it’s spending more time with family, pursuing hobbies, or starting new ventures, having a detailed plan written down is vital.

Quick Review

To recap, the three legs of the stool for successful exit planning are:

    Maximize Company Value - Get a market valuation and identify areas for improvement.

    Personal Financial Plan - Understand your current finances and plan for future income needs.

    Life Plan - Detail what you’ll do post-transition to ensure personal fulfillment and legacy.

    Remember, personal financial goals and aspirations should drive your business decisions, not the other way around.

    Need help with your financial planning and retirement?

    Book a no-obligation initial call and let's see if getting your Free Readiness Assessment is right for you.