Leave Your Business in Style

2010 | Jun 23 in Exit Planning , Guest Contributor , Home Page News

Seneca quote

Nora Chapman's story was typical of most business owners. At age 54, she was ready to leave her 25-employee advertising business. She was thinking of selling to one or two of her key employees and when we met her, her first question was: “Is this the right exit choice?”

Many of you find yourself in the same predicament. You’re beginning to think of a time beyond business ownership. But you don’t have a clear vision of how to “leave your business in style.” So what do you and the Nora Chapmans of the world do? Here’s what we told Nora:

First, understand that leaving your company is a process. If you’re already taking action to leave your business, ask yourself if you're approaching your exit in a methodical, logical and rational manner. Most owners don't undertake the necessary thought and planning that supports good ownership transitions because they don’t know how to begin or exactly what to consider and analyze.

Most owners, and their advisors for that matter, are unaware that there is a planning and implementation process that can provide that foundation. For those familiar with E-Myth however, it’ll come as no surprise that there is a system for successful exit planning; it’s called The Exit Planning Process. This process begins with understanding your exit objectives and the value of your business. Neither of these are small undertakings. Defining your true objectives can be a soul-searching experience. Determining the true value of your business can be a sobering process. It’s not unusual for business owners to overestimate the value of their business—after all, the blood, sweat and tears you’ve put into your business make it priceless, right? Not necessarily.

Once you’ve determined what you want and what you (really) have, you then determine a proper path for you, be it a sale to a third party, a transfer to children, a sale to an ESOP (employee stock ownership plan), a sale to a co-owner, or an orderly liquidation. Simply knowing the process and proceeding down the Exit Planning path, however, is insufficient. According to the Small Business Administration (SBA), most business owners who begin the planning process fail because they fail to plan. To succeed, you need a written plan that clearly documents your exit objectives, the financial and other factors that need to be considered; and how you are going to achieve those objectives.

Along with this written plan you must have a checklist that:

Assigns responsibility for each task to be completed throughout the Exit Planning process
Sets a date for the task to be completed
Designates the person responsible for completing that task

Getting Started in the Exit Planning Process

While many business owners are skilled at starting businesses, most have not made a career of exiting businesses. Without professional assistance, business owners often fail to sell their business; or at best, they leave a lot on the table: a lot of their money, their time or their own happiness.

And, as skilled as your attorney, CPA or financial and insurance representative may be, each is unable to craft a successful Exit Plan—when acting alone. Successful Exit Planning is a multi-disciplinary effort that requires you and your advisors working together. No one profession possesses the breadth of knowledge necessary to advise a business owner on the wide variety of Exit Planning issues.

For your Exit Plan to succeed, you need legal input, financial input, tax input, financial advisory input, and, often, consulting input. You may need, at some point, the services of a Business Broker or Investment Banker. No one advisor can be up-to-date on all of the intricacies of each discipline.

What does it take to create an Exit Plan?

Understand that there is a proven Exit Planning process. Learn as much as you can before you make final decisions.
Commit to see the process through.
Document your decisions and create a written plan (and checklist).
Hire an experienced team of professionals — Attorney, CPA and financial or insurance representative (at a minimum) to help see you through this process. These professionals should more than pay for themselves by putting money in your pocket. If they cannot, you have the wrong team.