Exit Planning

Exit Planning
By: Dan LoIacono


As business owners we learn, often by trial and error, how to operate our businesses in a way that generates a profit. Operating a profitable business takes a good deal of attention and effort for most business owners. Thinking about selling the business usually does not come into a business owners mind during the daily challenge to make a profit. The idea to sell our business too often tends to coincide with our need or desire to exit the business or retire within 12 months. For many business owners, a considerable amount of their net-worth is tied up in the value of their business, and selling the business is a method to access retirement funds.

Planning for the sale of your business will help eliminate potential surprises. Waiting until the last minute to consider the sale of your business can be setting yourself up for an unpleasant surprise. At ABMI we are honored to have the opportunity to work with a number of business owners who are considering selling their business. Unfortunately, sometimes the sellers have waited until the last minute to think about selling, and want to exit the business quickly. Some comments from surprised business owners this year have been. “I thought my business was worth much more than that.” “I can’t believe I will have to pay that much in taxes.” “I never kept good financial records, does that really matter?” We do what we can to help the business owners work through these issues and improve the outcome, given more time and planning the outcome could be much better.

Proper planning can help eliminate some of the painful and costly surprises. Here are a few things to consider as an “Exit Planning Roadmap”.


Exit Planning Roadmap

Step 1 - Set Your Exit Objectives
o When do you want to retire?
o What will it take- in cash- to generate the retirement income you need?

Step 2 – Prepare financial statements and other business information.
o Buyers will want to look at financial statements for at least three years, a list of assets, contracts with vendors, and other documentation related to the business.

Step 3 – Consult your advisory board
o Assemble a team of advisors to assist you with planning. This team should include a CPA/Accountant, Tax Advisor, Attorney, Estate Planner, and Business Broker.
o Explore strategies to minimize the tax impact of the gain.

Step 4 - Determine the Value of Your Business
o How much is your business worth today? Consider obtaining a third-party appraisal from a professional who specializes in business valuation.

Step 5 – Develop a plan for the company to function with minimal owner involvement if needed.
o Unfortunately, many business owners build their business to function around the owner. If the owner is not actively involved the business will no longer function. This creates challenges for a new buyer and reduces the marketability of the business.

Step 6 – Fine tune the business
o Put yourself in a potential buyers’ shoes. Make the business look appealing to a buyer by cleaning up the business as needed both from a physical and financial perspective.

Step 7 – Select a business broker to market your business
o Maximum market exposure handled in a professional and confidential manner is essential to capture the greatest value for your business. Your focus should remain on operating the business with minimal distractions. Engage a professional to market your business and keep your mind on your business.