The Three Things In Life You Can Count On

By Philip Elworth

The old saying goes there is nothing in life you can count on except death and taxes. I would like to add to this statement something that is closely related. If you are a business owner you can also count on the fact that you will exit your business. How you exit your business is a choice and one you will need to plan for if you want to maximize its value.

To begin this planning process, let me ask you, as a business owner, how you view your business? Is your business a job or is it an investment? How you answer this question will help determine how you plan for an exit. If it is an investment then you will want to protect it and maximize it. If your business is just a job, I would ask you to reconsider why you started or bought the business in the first place and what you would like your legacy to be.

Exiting a business has many variations. The exit could be an outright sale to a third party. It could be in the form of a recapitalization, where you sell the majority of the company, stay active in growing the business with an infusion of capital by the new majority owner with the intent to sell it for even more down the road. You could sell the business to your key managers, or all the employees through an ESOP. Your business may be large enough to do an IPO and take it public. You may want to gift or sell it to your children or gift it to a charity.

The method you choose starts with a needs analysis and a financial plan for you, the exiting owner. Working with a certified financial planner to understand your long term needs, as well as how you will reinvest the proceeds from a sale goes a long way to helping you understand how to maximize the value of the business. The further out you begin this planning process the better positioned you can be to fulfill your goals. The need to sell in the next six months is a very different strategy than one where you have years to execute.

Once you have a general plan, you can begin to clean up and run the business with this plan in mind. When I meet with new clients one of the first questions I ask is for them to describe their exit or long term strategy. The recommendations I make are dependent upon the direction the owner wishes to go. It usually takes a period of time to position a business for sale. This time frame is further affected by the economy at the time of the sale. The opportunities to maximize value of a business transition follow a cycle not unlike the housing cycle. Understanding the environment today, versus the needs to be accomplished to ready a business for sale will help determine the time line.

Planning your exit should start today. As a partner at B2B CFO^® I am available to assist you with the planning and executing of your exit strategy.