Exit Planning: Answering Your Commonly Asked Questions

Not all business owners think about exit planning. Their exit is a future event that they rarely discuss or address when the time is right. However, their exit is inevitable, and they need to plan for that exit. Failing to plan their business exit is planning to fail.

When starting an exit plan, business owners have a lot of questions. That’s normal since most of them exit only once, and they must get it right the first time.

This article addresses the top five questions business owners have concerning exit planning.

1. How Do I Determine My Exit Plan?

Exit planning is personal. It’s also a complex and lengthy process benefiting from relevant skills and experience. Without an exit plan, you are likely to get lost in your exit journey.

Determining your exit plan or strategy helps you protect the value of your business, achieve a smooth transition of ownership, accomplish your exit goals (financial, business, and personal), reduce the potential tax burden, and grow your business.

An experienced and skilled advisor who can guide you through the process is essential. Your advisor will help you determine the most suitable exit strategy for your unique business, situation, and requirements.

2. When Should I Start My Exit Plan?

Now. If you haven’t started already, then start now–and begin with the end in mind.

Even if you do not want to exit soon, having an exit plan will improve your business’ value. An exit plan should ideally be a part of your business plan. It gives you direction and motivation to grow your business.

Because exit planning is a complex and time-consuming process, starting early to depart your company on your terms makes good sense.

Read our “Exit Planning Timeline” to understand the exit planning timeline, the stages of exit planning, and how much time each step takes.

3. How Can I Sell My Business for the Best Price?

You want to sell your business for the best price, and an exit plan will help you do that. Begin by knowing how much your company is currently worth: e.g., its fair market value now. Fair market value is the business value calculated scientifically as per generally accepted parameters–not a “guesstimate.” So, getting a professional valuation is advised.

Your advisor should then help you with the value-creation process. Analyzing your business valuation report reveals areas where your company is lacking. This information enables you to compensate for those areas.

When your business value matches your exit goals, you can sell your business for the best price.

4. How Do I Know the Business is Ready for an Exit?

Your advisor will help you plan the business exit. It may depend on your preferences, although most business owners want to sell for the highest price.

You’ll also need to time the market to your advantage. Many external factors influence your exit success: tax policy, interest rates, economy, market conditions, etc. Even if you have reached your desired business value, you cannot exit successfully if the timing is wrong. Rely on your advisor to know the right time for business exit.

5. What Are My Options for Business Exit?

Exit planning may take place via different routes:

• Merger/acquisition
• Selling
• Family transition
• Selling shares
• Initial public offering
• Liquidation.

Your goals, business size and type, succession decisions, and more determine the most appropriate business exit to serve your goals. It’s neither a decision to make lightly nor an easy decision.

How Can Quanive Help?

Exit planning is a long and complex process. Understanding the basics will help ease some of the stress and get you started. Quantive has a demonstrated history of helping business owners achieve their desired exits.

Connect with us to know how we can help you determine your exit plan/strategy and sell your business at the best price.