What is the difference between an Exit Plan and a Succession Plan?

Generally speaking, a Succession Plan is focused on the transfer of business leadership and/or management from its current leadership to insiders or successors within the the business. In other words, the business ownership will be transferring from a parent to his/her child or from the owner to an employee. Both the owner and the successors are aware of the plan and the successors are provided the opportunity to develop the necessary skill sets to successfully run the company post-transfer.

An Exit Plan is a more comprehensive plan that uses the business owner's personal objectives to convert their current reality into their desired outcome with respect to their personal financial stability, their business, their family and community. The Exit Planning process helps maximize the financial return, minimize the tax liability, plan for contingencies, and increase the likelihood of a successful transfer of the business, regardless of whether the business is transferred to insiders or to a third party.

When should I start developing my Exit Plan?

If you are like many business owners, you enjoy going to work each day and you don't know what you would do if you didn't have a business to run. Why concern yourself with an Exit Plan? The simple answer is Freedom.

Developing an Exit Plan does not mean that you have to leave the business at a specific time. It does, however, give you the flexibility to back away from day-to-day involvement when and if you choose to do so. The business must be prepared to continue without you and the Exit Plan simply provides you the freedom to stay or leave as you desire.

When is the right time to sell my business?

There are many factors that should be considered when determining whether it is the right time to sell your business. What are your exit goals? Are you looking to retire? If so, will the after-tax proceeds of your business sale be sufficient to achieve your retirement needs?

What have you got to sell? Is the business growing, stable, declining? Do you have well-trained management and staff in place to run the business? Is the business in an industry that is growing or declining? Are you looking for a third-party sale or would a sale to an insider (family member, employee, etc.) be preferable?

Have you or your advisors implemented any procedures to build value in the company and to protect that value? Are there key employees or others that will need to stay with the business to ensure a successful transition?

The right time to sell your business is when you are prepared, your business is prepared, and the business sale will achieve your personal objectives. Your Exit Plan will be the roadmap that guides you to your destination.

What are the some of the key value drivers of a business?

Value drivers are the characteristics of a business that increase or decrease the value of the business in the eyes of a prospective buyer. The following are some of the value drivers common to nearly every industry.

  • Clean Books and Records
  • Effective Financial Controls
  • A Stable, Motivated Management Team
  • Strong and Growing Cash Flow
  • Operating Systems that Improve Sustainabiity of Cash Flow
  • A Solid, Diversified Customer Base
  • A Realistic Growth Strategy
  • Clean Well-Organized Business Premises

I haven't done any planning and just want to sell my business. Can you help me?

Yes, we can help you. However, there are many questions that must be addressed before marketing a business for sale. How much is the business worth? Will the sale of the business at or near its current market value give you the after-tax proceeds that you need to keep up your lifestyle after your exit? Do you have a likely buyer or successor? How has your business changed in the past few years? Is your business growing or declining?

The questions above and many others must be addressed and generally a business summary and other marketing materials must be created in order to successfully sell a business.