WHAT IS AN EXIT PLAN?
Updated: Apr 28, 2021
An exit plan is a comprehensive road map to successfully exit a privately held business. An exit plan asks and answers all the business, personal, financial, legal, and tax questions involved in selling a privately owned business. It includes contingencies for illness, burnout, divorce, and even the owner’s death. Its purpose is to maximize the value of the business at the time of exit, minimize the amount of taxes paid, and ensure the business owner is able to accomplish all his or her personal and financial goals in the process.
An exit plan can be complex and usually requires advice from a number of different specialists. But, failure to create a well-defined exit plan virtually guarantees that the business owner will:
Exit their companies as a result of pressure from outside circumstances, not as a result of their own desires.
Exit their companies on a timetable that’s forced on them instead of one that meets their needs.
Undervalue their companies and leave hard-earned wealth on the table.
Pay too much in taxes.
Lose control over the process by being reactive and limiting their exit options.
Fail to realize all their business and personal goals.
Suffer unnecessary psychological stress.
Watch a lifetime of work disintegrate as a result of poor business continuity planning.
Lose confidentiality during the sale or exit process.
On the other hand, a well-designed and implemented exit plan enables business owners to:
Control how and when they exit.
Maximize company value in good times and bad.
Minimize, defer, or eliminate capital gains taxes.
Retain control by generating a number of strategic exit options.
Ensure they achieve all their business and personal goals.
Reduce their stress and that of their employees and families.
Ensure continuity of the business.
A recent survey by the PWC and University of Connecticut Family Business Program, showed the number one reason private business sales fail or only partially succeed is a lack of planning on the seller’s part. However, in spite of the importance of exit planning, most business owners spend more time planning a family vacation, than when and how to exit their business.
Family Legacies www.family-legacies.com is a multidisciplinary family business consulting company. Our consultants are leaders in their respective fields including; Family Business Consulting, Strategic Planning, Financial Planning, Wealth & Risk Management, Corporate Finance, Business Transitions & Exit Planning - Buy, Improve, Grow & Sell Businesses, Commercial & Family Law, Executive Coaching, Leadership Development & Facilitation, providing our clients with a professional and integrated multi-disciplinary service.