Anyone can create or build a business. But how do you exit the business successfully? The decision of whether to exit your business or not, is never a simple decision. Most business owners hesitate or even procrastinate when making decisions about succession and transfer of business ownerships. It’s natural to avoid thinking about matters that are unpleasant, such as death or disability. In most cases, it is not just one decision, but there are several interrelated decisions to grapple with, for example, how much money will you receive upon exit? What is the best timing for the exit, given the economic cycle? What kind of advisors will you need? What will happen to your staff, customers and business partners?
In reality, Business Owner(s) are so caught up in the day to day management of the business that there is a tendency to prioritize matters that are urgent over matters that are important. Sometimes, things can happen unexpectedly – People become disabled; people die. Even if your business is in growth mode and you have no thoughts of retirement, you still need to deal with the contingencies of a forced exit. Peace of mind and security for you, your family, your business partners and employees – these are all reasons to think about your exit plan NOW well before you time the date of your exit.
Fortunately, today, there is a growing body of knowledge on Business Exit Planning. There are an overwhelming number of options available to Business Owners – options for those who want to exit in financial sense but remain active in business; options for those who no longer want to be active, but may want to remain invested in business; and options for those who want to sever ties completely.
Business Exit Planning is the process of defining exit-related objectives and strategies of the Business Owner(s), followed by a road map that takes into account all personal, business, financial, legal, and taxation aspects all in the context of planning the succession and continuity of the business. Objectives may include maximizing (or setting a goal), minimizing risk etc. The strategy will usually include the mode of exit envisaged (i.e. sale, going public, selling to management, transferring to children etc.), marketing, tax planning and timetable. The strategies should also take into account contingencies such as illness or death of the Business Owner (s).
Generally, a Business Exit Plan document would summarize all or a portion of the following subjects:
- Summary of business objectives. What are your own motivations for seeking a Business Exit?
- Valuation (according to appropriate valuation methodologies)?
- What options for Business Exit strategy might be considered? The pros and cons of each option, along with the likelihood of success.
- What are the market conditions for exit?
- How saleable is your business? Is the profile of your business likely to be a strategic fit for investors? What processes might be considered for the exit?
- How can value be enhanced prior to exit?
- Tax and Estate planning
- Accommodation of minority shareholders or co-shareholders.
- Contingency plan (if death or disability would occur, what changes in governance you would want in your company?)
It would be worthwhile to revisit and update your Business Exit plans on an annual basis.
Most Business Owners find the subject of Business Exits excruciatingly difficult and burdensome. We have experts in your location to help you understand your thoughts, talk to your accountants, your legal and tax advisors and help you prepare your Business Exit plans and, if required, even manage Business Exit transaction.