An exit plan is a comprehensive road map to successfully exit a business. An exit plan asks and answers all the business personal, financial, legal, and tax questions involved in selling a privately owned business.
An exit plan includes contingencies for illness, burnout, divorce, and even the owner’s death. Its purpose is to maximize the value of the business at the time of exit, minimize the amount of taxes paid, and ensure that the business owner can accomplish all his or her personal and financial goals during the process.
The impact of good exit planning versus poor exit planning can be seen in the result of the many companies that have gone through the exit process. The following two lists identify the impact of both good and poor exit planning. I developed these lists after reading the book “The $10 Trillion Opportunity” by Richard E. Jackim and Peter G. Christman.
A well designed and implemented exit plan enables business owners to:
- control how and when they exit
- maximize company value in good times and bad
- minimize, defer, or eliminate capital gains taxes
- retain control by generating a number of strategic exit options
- ensure they achieve all their business and personal goals
- reduce their stress and that of their employees and families
- ensure continuity of the business
- preserve family harmony
- reduce employee and family uncertainty
- plan for a fulfilling and exciting retirement
Failure to create a well-defined exit plan virtually guarantees that the business owners will:
- exit their companies as a result of pressure from outside circumstances, not as a result of their own desires
- exit their companies on a timetable that’s forced on them instead of one that meets their needs
- undervalue their companies and leave hard earned wealth on the table
- pay too much in taxes
- lose control over the process by being reactive and limiting their exit options
- fail to realize all their business and personal goals
- suffer unnecessary psychological stress
- watch a lifetime of work disintegrate as a result of poor business continuity planning
- lose confidentiality during the sale or exit process
Exit planning is critical to the owner of a business, but also to their families and all stakeholders in the business. Whether or not you plan to sell your business, pass along to family members to run, sell to your employees, or just liquid the company at the end, committing to a structured exit planning process can have a significant return on the investment of your time and expenses.
There are many benefits of exit planning. CLICK HERE to learn more about the benefits of exit planning and view a video that discusses these benefits.
Another phrase of exit planning is end game planning. Learn more about end game planning at our website on end game planning.