When Is the Best Time to Start Exit Planning?
The HBO series “Succession” centers around Logan Roy, a patriarch who owns a large media and entertainment conglomerate, played by award-winning actor Brian Cox. As his children are fighting him for control of the company, Roy suffers a stroke. The drama and intrigue — and family in-fighting over Roy’s succession — are what make the show engrossing.
Sadly, the truth is not far removed from fiction when it comes to family-owned businesses. According to the Exit Planning Institute 2013 State of Owner Readiness survey, 49% of business owners have no transition plan whatsoever.[1] Whether family run or not, businesses are flirting with disaster if the owner has not undergone any sort of exit planning.
Just like individuals should prepare an estate plan, business owners need to plan for their eventual exit from the business. And just like individuals who procrastinate their estate planning to avoid dealing with their eventual demise, business owners have a difficult time imagining life after they leave the helm. Yet, whether by design or default, a business owner will inevitably transition from their business.
A proper exit planning process has numerous positive benefits. A comprehensive exit plan aligns a business owner’s personal, financial and business objectives in a way he or she may not have considered before.
Effective exit planning is forward looking, as the planning ideally takes place years before an actual departure. With an exit plan in place, a business owner has the flexibility to leave on his or her own terms and timeline. Without an exit plan, the exit can happen on a timeline outside of the business owner’s control. Yet, the statistics underscore the unmet need for exit planning across closely held businesses.
If you are a business owner, you can have control of your exit — doing so when you want, in the way you want, at a higher valuation because you have taken the time to enhance value as part of your exit planning. The alternative is to sell or transfer your business at an inopportune time and a low valuation.
Any time is a good time to start exit planning, even if that day is likely far in the future.
Source
[1]“State of Owner Readiness (Survey Results 2013).” Exit Planning Institute, 2013.