Three Pillars of a Successful Exit Plan
The decision to sell your business or take on an outside investor is not a singular event, but an ongoing strategic process defined as Exit Planning.
Most business owners avoid preparing an exit plan because they do not have a clear understanding of the process, or they are concerned about the cost and time commitment.
The reality is, that while exit planning is not easy, it is simple. If done properly, the out-of-pocket costs should be a fraction of the increased value of the business.
A well-run exit planning process has three main pillars:
- The Exit and Contingency Plan
- The Personal Financial Plan
- The Life After Exit Plan
The three processes are truly pillars because they support all of the important aspects of your life, value creation, wealth management, retirement planning, estate planning, your legacy and most importantly allowing you to live a fulfilled and satisfying life before and after your exit.
An exit plan asks and answers all the business, personal, financial, legal and tax questions involved in selling part or all of a privately held business.
At the core of the exit planning process is getting a true valuation of your business. Once we have an indication of the businesses true value, we look at what that amount means in the context of your overall personal financial plan. Simultaneously, we begin the discussion with what life looks like after you have exited the business.
As entrepreneurs, we are used to running hard 50 to 60 hours per week. How do you plan to fill that time in a meaningful way, so you maintain your sense of purpose and fulfillment?
Surveys have revealed that 60% of business owners regret exiting their business within six months of their exit. It is not because of the price they received, but because they do not know how to fill their time. By building an after-exit life plan early in the process you can ease into this new life after your exit without looking back.
Once you have these three pillars firmly in place, then you can start the process of value creation, risk management, and tackling the issues and opportunities uncovered during the benchmarking and assessment process.
Exit Planning is a journey, not a destination. The principles to develop a strong exit plan are all best practices for your business and you personally. Whether you are planning to sell in the near future, contemplating taking in an outside investment, or preparing you and your business for unplanned events, the time to start your exit plan is today.
I have started all my businesses with the end in mind. If you build your business with that mindset, you will build a business that is sustainable, profitable, liquid and one that will provide you with a better quality of life.