A Guide to Exit Planning

Whether you are an entrepreneur just starting out or a seasoned CEO of a regional powerhouse, an exit plan is crucial to map out your steps toward withdrawing from your business.

It may seem counterintuitive to have a plan to exit when all is going well, but life can quickly change for many reasons including your health, the economy, or shifts in the market in which your business competes.

When it comes to business, and life in general, it is important to expect and plan for the unexpected. An exit plan can help guide decisions that will impact your personal future and the future of your company.

Why Create an Exit Plan?

All businesses need an exit plan or strategy. Eventually, a situation will arise that will lead to a business owner leaving the company. During that time, having a plan already in place can help remove emotions from the situation and guide you through the situation rationally.

When creating an exit strategy or plan, it’s important to keep a few key points in mind.

What are your professional objectives?

For some individuals, their business is a life-long endeavor or labor of love. Entrepreneurial types may enjoy setting up new ventures, making them profitable, and then moving on to the next project. Deciding if you are in it for the long haul or for shorter-term success is beneficial for exit planning.

What are your life priorities?

How many hours a week are you willing to work? Would having a child or grandchild change this? Life events and prioritizing what is truly important to you can help bring clarity to your exit plan.

What is the current financial situation and future potential for the business?

The finances of being a business owner are complicated. Creating a profitable business takes time and a serious investment of resources. Understanding what your business is worth, your profit goal for the company, and what you’d need to make for the sale of the company to benefit you are important factors for exit planning.

How does your estate plan account for the business?

Are you planning to pass the business to an interested family member, or does selling the business at a profit play a part in your retirement strategy?

What is the value of your non-business assets?

Does the business make up the core of your net worth, or is it a small piece of your financial pie? The more heavily the business plays into your financial well-being, the more risk you carry.

An Overview of Exit Options

A succession planning expert can help you develop a business exit plan and guide you in mapping out how you’d like to leave.

Exit options include, but are certainly not limited to:

·????????Selling to a competitor, someone you know, or in the open market

·????????Liquidating and closing the business

·????????Transferring or selling to a family member

·????????Bankruptcy

When to Start Planning

To put the most advantageous plan in place, exit strategies should be developed at least 10 years before you intend to leave the business. By planning far in advance, beneficial strategies can be incorporated into your exit to help you avoid a large, unexpected tax bill upon selling. It also allows time for owners to identify potential leaders and mentor them over time.

At Jordan Financial Consulting and Coaching, we recommend creating an exit plan if you are over 45 years old, have nearly all of the ownership interest in your company or if your personal net worth is closely tied to the value of your company.

How to Get Started

The first step in a successful exit plan is a business valuation. When searching for a valuation partner, two main considerations should be experience and credentials. While there are several credentials related to business valuations, the Certified Valuation Analyst (CVA) designation is the most widely recognized credential and the only credential accredited by the National Commission for Certifying Agencies? (NCCA?) and the American National Standards Institute? (ANSI?).

Once a valuation is complete, exit planning can begin. Jordan Financial specializes in developing a strategy and roadmap that will enable you to maximize value and leave your business on your terms.

Sherry Jordan, CEO and founder of Jordan Financial Consulting and Coaching, has more than 20 years of experience in public accounting including business valuation, exit planning, and financial forensics. She is a Certified Valuation Analyst (CVA) with experience conducting valuations for businesses large and small.

Contact us to learn more about our business valuation and exit planning services.