Exit Planning is based on one simple premise, that at some point in the future, every owner leaves their business, voluntarily or otherwise and at that time they will want to receive the maximum amount of money in order to accomplish personal, financial and estate planning objectives.
Few business owners give this much consideration while starting or running their business, however, at some point it will become important.
Sometimes the exit may be forced upon an owner such as death of a partner or co-owner, divorce, realization that the competition is winning, pressure from family or debilitating health. If the process of exiting a business and succession is not conducted against an organized plan, it will inevitably be done in crisis, with perhaps catastrophic results.
Formulating an exit plan will provide a clear understanding of the ownership transition goals and the various steps, which will be required in order to achieve them. An owner/shareholder must clearly define their positions for some very basic questions such as:
How much longer do they intend to work?
What are their chances of maintaining good health to that date?
What would happen to the business if they did not?
What could the tax implications be on a sale of their ownership?
How much after-tax income will be needed when they exit?
Which ever exit route is taken, there is one very important item to remember and that is that typically, business owners achieve operational success based on learning, trial & error, making mistakes, and experience. However when owners exit from their business, in the vast majority of cases, they only get one chance.