Sticking a Toe (or two) in the Exit Planning Pool
Some of the most common objections owners make to undertaking the planning necessary to exit their companies successfully are:
- The business isn’t worth enough to meet my financial needs. When it is, that’s when I’ll think about leaving.
- I will be required to work years for a new owner.
- I don’t need to plan. When the business is ready a buyer will find me.
- This business is my life! I can’t imagine my life without it!
Exit planning not only helps your business while you are in it, but is also the best way we’ve found to leave your company to the successor you choose, on the date you choose and for the amount of cash you want. So, how do you, as an owner, jump into exit planning?
Let us suggest that one of the best places to jump in is to take some measurements.
First, retain a valuation expert to perform an estimate of value of your company to find out what it is actually worth. (If you plan to sell to a family member, co-owner or employee, retain a certified business appraiser. If instead you foresee a sale to a third party, ask a business broker or investment banker for a “sale price estimate.”) The transaction advisor you choose (an investment banker if your company’s likely value is at least $5 million, and a business broker for smaller businesses) should be able to give you a range of value for your business in today’s marketplace. As we’ve seen over the past few years, best guesses and educated opinions are nice, but they are weak foundations for exit planning.
Second, sit down with your financial advisor to figure out how much cash you will need to meet your financial needs. Again, tap into the expertise of your financial advisor to help you objectively analyze your future needs and make realistic, risk-sensitive assumptions about investment rates of return.
Many owners don’t have the luxury of time. We suggest that you stick at least your toe in the exit planning pool by taking these two simple measurements. Test your assumptions: you may be surprised at the results.
A Certified Exit Planner can help you get started on a plan that can make your company more valuable today and help you to achieve the future exit you desire.
This article contains excerpts from an article in The Exit Planning Review™ published by Business Enterprise Institute, Inc. Subsequent issues of The Exit Planning Review™ provide unbiased and advertising-free information about all aspects of Exit Planning. Please contact us or if you would like to sign up for a free subscription to The Exit Planning Review™, if you have any questions or want additional Exit Planning information.
