9 Essential Steps to Ensure a Successful Exit
Dan Chomko
January 11, 2010
At some point, every owner leaves his or her business – voluntarily or otherwise. At that time, the owner will want to receive the maximum amount of money to achieve personal, financial, income, and estate planning goals.
The ownership interest in your business is likely the most significant asset you will ever own, which is why it is necessary to plan for this transfer of ownership so that you can exercise maximum control over the outcome.
Planning is essential to achieve your objectives and there are important steps an owner must take in order to be in control of this process:
1. Establish owner-oriented objectives:
a) Determine the amount of income needed annually to secure your financial independence
b) Set a departure date
c) Decide to whom the business should be transferred: family, key employees, co-owner, or outside third party
2. Determine the value of your business via an independent certified business appraisal. Understand that this value is not the same as a sales price.
3. Form a multi-disciplinary advisory team to perform an initial assessment of your ability to exit and achieve your goals. From the findings, initiate a plan of action to accomplish your exit goals and strategy.
4. Introduce plans and programs to motivate and keep your key employees, which will help create and preserve value in your business when you decide to sell. Also, determine with your advisory team what can be done to increase the business “curb appeal”.
5. Seek assistance to familiarize yourself with the fundamentals of tax law to minimize your tax burden and maximize the proceeds from the transfer of ownership.
6. Examine each of the ways you are able to leave your business and determine which the best option for you is.
7. Draw up a business continuity agreement (or buy-sell agreement) which controls operational management or the transfer of ownership upon occurrence of certain events.
8. Work with your advisory team to refine the action plan that will assist you in reaching your personal, financial, and estate planning goals. This includes where your money will go when you pass on and the Government receives no more than its fair share.
9. Review the plan and its progress annually to make sure it is on track. This insures you deal with all issues that will impact the plan rather than stand alone situations.
Your advisory team is essential to success here; a team approach, bringing all the disciplines to bear, will insure you reach your singular goal.