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I Know The Process Takes Time

To correctly evaluate the true value of a business, create and implement a Value Improvement Plan that increases business value, and prepare for the final exit or transition of the business owner takes time.

Creating a team of legal, financial, and strategic advisors and creating a process to involve all the appropriate stakeholders requires planning and patience.

So begin with creating a core team that will help plan and execute the plan over the extended timeframe of the planned exit event or transition. The plan needs to consider legal, accounting and tax issues.  The plan needs to determine the expected valuation of the company and establish a plan that improves that valuation. 

An action plan needs to be created and reviewed regularly to assure that the planned activities are executed properly and in a timely fashion.  Review is critical and changes in the marketplace or other changes in operating conditions need to be integrated into updated plans.

I Want to Sell My Business

So often business owners who are nearing the time to sell their business jump to the end of the exit planning process and begin approaching business brokers or investment bankers.  Sometimes this is appropriate.  But most of the time the business owner can better achieve their goals if they take the time and effort to go through a structured exit planning process that help them identify their goals, enhance the value of their business, and have control when exiting their business.

Although there are many steps that need to be taken in creating and executing a well-constructed exit plan, the following are the top six high-level steps that we recommend be taken in selling or transitioning from your business:

  1. Use A Professional
    Use an outside professional who will guide you through this process.  This could be a business transaction attorney, an accounting firm with experience in exit planning, or professional exit planning professionals.
  2. Investigate
    Conduct a thorough investigation to define your needs, goals, and objectives of the business transaction. Take an honest look at the value of your company as viewed by prospective buyers.
  3. Estimate your Valuation
    Research to see how much your company is worth today and would be worth under other targeted conditions.
  4. Create a Value Enhancement Plan
    Develop a Value Enhancement Plan to increase the value of your company during your the preparation phase before selling your business.
  5. Update Your Personal Plans
    Create and/or update Estate Plans and Wealth Management Plans to determine how the sale of your business will impact these plans.
  6. Create a Plan That You Will Follow
    Create a detailed Exit Action Plan that identifies the many steps that are required to maximize the value of your business and control the way in which you sell or transition from your business.

I Need to Start Planning for Retirement Now

For most business owners, the proceeds from the sale of their business generates a significant portion of the basis for their retirement investments. Therefore it is important to integrate the exit planning for a business with the retirement planning of the owner.

Tax planning can also be important, particularly if portions of the retirement plan focuses on providing assets or cash flow to grandchildren or non-family members. And depending on the size of the estate, care has to be taken to minimize estate and gift taxes.  If enough time is available company assets and/or shares can be transferred into an Asset Protection Trust.

The deal structure also has significant impact on the owner's retirement plan, particularly if an earn-out stretches out of several years, or stock of the acquiring company is a significant part of the purchase price.

Ultimately the deal structure, wealth management, estate planning and tax planning are all linked together.

What Options Are Available

Depending on your circumstances there may be many different options available to you:

  1. Maximize the value of your company and sell when you can find a buyer who will meet your price.
  2. Sell now because of current business and/or personal situations.
  3. Re-engineering your business so that you can stay on as the owner, but delegate much of the management to your management team.
  4. Take out a portion of the value of your company through recapitalization of your business.
  5. Create an exit plan that will enhance the value of your company and sell the company on a specified date for the best available price.