Exit Planning Six Steps


Exit Planning Six Steps

Whether you plan to sell your company outright, transfer it to management, or pass it on to your children, you need a roadmap to help you get there. While Exit Planning can feel overwhelming, our 6-Step Process is valuable in formulating a game plan and making progress toward your goals.




Step One – Establishing Owner Objectives

What would you like to achieve with your exit? When? For many owners, it isn’t simply one thing. Often, it is financial security or diversification. It could be a desire to involve children or to reward key employees. Perhaps it’s to achieve the freedom to enter the next chapter of life. Whatever it is for you, it’s important that you spell out your goals.

Step Two – Financial and Mental Readiness

Do you know what it would take to be financially independent outside of your company? A thorough analysis will determine the financial resources necessary to sustain your lifestyle after exit. The results define the Value Gap between your projected assets and what’s needed to meet your goals. Additionally, you must assess your mental readiness for exit. What will you do after exit? How do you feel about being identified as someone other than the owner of your firm? The mental game is often more challenging than owners think.

Step Three – Discover Which Type of Owner You Are

Business owners typically fall into four categories based on their financial/mental readiness. Your exit options become clearer once you recognize your owner type and the corresponding transfer methods. Who do you resemble?

  • Rich and Ready To Go – Financial readiness is high, and mentally you can’t wait to start life’s next chapter.
  • Wealthy But Enjoy Work – You are financially set, but you like working and don’t want to retire.
  • Stay and Grow – You’re not financially ready, and are happy to work to build net worth and company value.
  • Get Me Out Now – Your needs require much from the business, but mentally you are headed for the exits.

Step Four – Learn Your Exit Options

If you are like most owners, you know very little about ESOPs, Private Equity Recaps, Management Buyouts, Gifting Strategies or the myriad ways to structure a Third Party Sale. An education is helpful, even if to merely discard the options that won’t apply. Given your goals and financial needs, the most likely exit paths begin to take shape in this step.

Step Five – Understand the Value of Each Option

It’s not what you make, it’s what you keep! You must run the numbers for each of the applicable exit options. You’ll learn about the range of values associated with private companies, the impact of taxes and fees on any transaction, and the cash flow results for both you and the business throughout the exit. You’ll want to know this well before executing the plan.

Step Six – Execute Your Strategy – Protect Your Wealth

You’ve chosen your option, made your plan, and now it’s time to execute. Assemble your team, plan for contingencies, and take action. You’ll learn how to help protect your wealth from estate taxes and provide for plan completion in the event of an untimely death or disability.  This final step provides the written action plan for you and your advisory team to use as the roadmap for making your goals a reality.

Separate from the Exit plan and an advisors’ role as financial planner, an advisor may recommend the purchase of specific investment or insurance products or accounts. These product recommendations are not part of the exit plan and clients are under no obligation to follow them. Financial Advisors do not provide specific tax/legal advice. This information should not be considered as specific tax/legal advice. You should consult your tax/legal advisor regarding your own specific tax/legal situation.