The Overall Goals of
Planning Your Business Exit

The Overall Goals of Planning Your Business Exit

In the last issue (#45), we encouraged you to Rise Above the Excuses for not Planning Your Business Exit.  In this issue we discuss The Overall Goals of Planning Your Business Exit.

A Favorite Famous Quote
"If you don't know where you are going, you will
wind up somewhere else!"  Yogi Berra

The Overall Goals of Planning Your Business Exit

Exit planning provides the road map for successfully selling your business, transitioning to the next stage of your life (whatever that may be depending on your choices) and learning how to control your own destiny.

Business exit planning creates a path to achievement

It helps you establish realistic business, personal and financial goals and helps provide a path to achievement.  Your desires in those three aspects of your life have to be consistent with each other.

Set realistic expectations

For instance, if you are 55 years old and have liquid savings of $500,000, a business worth $400,000 and you want to retire in five years (at age 60) with retirement income of $200,000/year so you can "travel the world," the numbers are inconsistent.  Your projected retirement income is not on target with your desires.  Something has to change and, in this instance, you'd probably have to adjust your expectations for retirement income and the amount of travel you can afford.  It's also possible that you think your business is worth $1,000,000, but it is really only worth $400,000.  That is clearly important for you to know so you can adjust accordingly, possibly developing plans - if you start early enough - to increase the value to $1,000,000.

Assess your personal financial situation and longer-term goals

Just like reading a road map, you need to know where you are before you can determine where you are going.  A good exit plan begins with an assessment of your existing personal financial situation, including a baseline business valuation as well as the value of other assets you own.  That's where you are.  To determine where you are going, it helps to preliminarily establish longer term goals such as how long you intend to own the business, what you intend to do after selling it and to whom you would like to ultimately sell the business (children, employees, third party).  That information lays the groundwork for preliminary determinations of your future financial needs.

Planning keeps you in control of your destiny

Mental preparation to depart your business is another goal of exit planning.  Making that final decision to sell is often difficult and emotional.  It is never simple.  But making the decision to go through the exit planning process is far different than making the actual decision to sell.  From a timing standpoint, your exit plan can be flexible.  The earlier you start the exit planning process (from day one of ownership is recommended), the better off you'll be.  However, just knowing you have a plan will ease the pain when the actual decision time arrives.  Planning keeps you in control of your destiny.......