Ten Key Exit Planning Questions Every Business Owner Should Ask
If you own a business, one of the most important things you can do is to have a detailed Exit Plan in place. When the time comes to exit your business, an Exit Plan will ensure a smoother and more profitable transition. If you don’t yet have an Exit Plan, there are some key questions to ask yourself to get the process rolling.
If you’re willing to invest a few minutes right now, with pen and paper in hand, to begin answering these ten questions, it will pave the way to an easier business transition down the road.
1. Are you sure of what your business is worth? Any Exit Plan starts with this important piece of information. However, even if you think you know the value of your business, you probably need to engage a third-party professional to confirm the numbers.
2. Will you pass your business on to an outside buyer, to your employees, or to family members? Deciding this important issue now will significantly affect other factors in your Exit Planning process.
3. What will your financial needs and sources of income be after you retire? If you don’t know how much money you’ll need for 20 to 30 years post-retirement, you may be setting yourself up for hard times in old age.
4. Do your retirement plans depend on the proceeds from the sale of your business? If your desired retirement lifestyle will require you to realize significant proceeds up front, then how you structure the transaction – and who the business goes to – is a very important decision to consider right now.
5. Is there a business succession plan in place that ensures your company can operate without you at the helm? If not, you may have to stay involved with the business for an extended period after selling or transitioning out.
6. Have you considered the timing of your business transition? Many Exit Planning issues depend on how far in the future your exit will be.
7. How detailed is your Estate Plan? If you haven’t dealt with these issues wisely, you’ll wind up giving the government more than you need to. Is that really where you want a big chunk of your hard-earned cash to go?
8. Are you doing things now that will maximize your business value? You’d be surprised how a little corporate strategic planning can go a long way to increase the proceeds from the sale of your business.
9. How skilled and experienced is your current team of business advisors? Most business owners have a collection of advisers, each with their own specialty and agenda. There is usually no one charged with integrating all the advice from all the advisers into one comprehensive plan. Your Exit Plan will help with this.
10. Do you really intend to exit your business without professional help? You’ve probably never – or rarely – exited a business before. Any mistakes you make, no matter how unintentional, will have very long-term consequences. Putting together an experienced professional Exit Planning team to help, especially in the early planning stages, will make a big difference.
