Most business owners spend months, and sometimes years, drafting the perfect business plan. The right plan guides every major decision, allowing you to weigh results against anticipated outcomes and assess accordingly. You’re not going to run your business forever. So don’t wait until something forces you to sell or exit. Exit planning should be a key component of business planning from day one. The right exit plan helps your business remain valuable, empowering you to attract well-qualified buyers who can take over and even grow the business when you’re ready to sell.
Here’s what you need to know about this important and oft-neglected document:
What is an Exit Plan?
Much like your business plan, an exit plan is actually a group of continually changing and interrelated plans that support growth and anticipate change. Well-drafted exit plans consider your preferred timing and goals for exiting your business, including the person to whom you would like to sell or leave the business.
Some important questions can help you draft your exit plan, think more clearly about your business, and plan for the future:
- Are any family members involved in your business? What are their goals? Are they competent to run the business, and interested in doing so?
- What are your financial goals? When and how do you hope to retire?
- How much is your business worth? How can you justify that value, and what might increase it?
- What would make your business a more attractive investment for a buyer?
- How can you effectively manage trust, tax, and estate issues as you transition to retirement?
- How must you shift your role in the business to ensure a successful exit and happy retirement?
- What do you want to happen to your business when you no longer run it?
- Are you emotionally prepared to leave your business, and if not, what specific steps could help you emotionally prepare to exit?
Drafting Your Exit Plan
Your exit plan isn’t something to dash off on a post-it note just so you can say you did it and check it off of your to-do list. This is an evolving document that you must regularly revisit and revise based on any major life or business change. Some important reasons to re-evaluate your business plan include:
- Changes in your family that might effect who can run the business.
- Health issues that might move your retirement date.
- Shifts in personal or business goals or finances.
- Changes in the market that could affect the future of your business.
Your exit plan should list concrete and specific actions and goals for the coming months and years. The goal is a long-term vision of the future that allows you to update your plans as things change.
