close x

Exit Planning – Seven Step Planning Process

If an owner wants to leave the business in an orderly and well-orchestrated fashion, then following this seven-step process will assure them of just that:

1. Determine your personal and business goals. Integrating these is important because so much of the owners’ wealth is in the business, and taxes are a major consideration.

2. Determine the value of the business. If you don’t know what the true market value of the business is today, how can the owner know what the value needs to be to successfully exit?

3. Promote, protect and preserve the value of the business. Placing value drivers, such as key employee compensation, that reward growth will assure that what value has been built will not be diluted. It also lays the groundwork for measured growth.

4. Sell to insiders, as may be the case with family businesses and/or businesses with solid key employees/management or an employee stock ownership plan (ESOP); OR

5. Sell to a third party (a competitor, a strategic buyer, private equity, etc)

6. Ensure overall business continuity. Are Employment Agreements in place with Key Management to ensure stability if the Owner leaves or is ill? Stay Bonuses and other arrangements can be drafted to guarantee stability of Management. Make sure all the necessary documents and funding are in place in the event the owner dies, gets disabled, becomes disinterested, or divorced by other partners to assure the business will not fail and the heirs are compensated fairly.

7. Financial and Estate Plan. After all the time invested in building the business and finally exiting, the largest tax ever paid is the one levied the year the owner is not here to defend against the estate levy by the IRS – due in nine months and only cash. In addition, does the after-tax proceeds from the sale, along with all other financial assets provide the lifestyle to which the owner has become accustomed?

Read More about “The Seven Step Process” in our article The Ultimate Business Owner Event.

Another consideration in your business is Contingency Planning. Read More about Contingency Planning.