Exit planning is an essential part of business planning. Whether you plan on working until you are no longer able, handing over your business to the next generation, or selling it, the fact is that you will not own your business forever. Therefore, exit planning, regardless of where you may be in the business life cycle, should be an integral component of your overall business strategy.
While planning for your exit can provide peace of mind, inadequate exit planning can negatively impact the success of the exiting party, as well as the business itself, both during and post-exit. Business owners who want long-term success must take exit planning seriously. What is exit planning, and what are the significant benefits of preparing for and customizing a smooth “passing of the baton” to the subsequent owners?
What is Exit Planning?
Exit planning is a comprehensive strategy that allows business owners to exit the business on their terms. It answers all personal, financial, legal, and tax-related questions regarding the change in ownership of a privately owned business. Furthermore, it includes contingency plans for death, disability, disagreement, divorce, and other unforeseen circumstances.
Exit planning ensures that business value is maximized, personal and business goals are achieved, and tax liabilities are minimized at the time of exit. It is a team effort that includes the business owner and a skilled team of experts, including tax specialists and exit planning advisors. The goal is to smoothly transition ownership of a privately owned business in a way that streamlines the process, benefits the exiting party, and allows greater control over the exit process.
Not planning on exiting your business anytime soon?
Learn why it’s never too early to start exit planning in order to get the maximum value for your business on your terms. Contact Windes today to start focusing on accelerating the value of your business for a more profitable and smooth exit when it’s time.
Benefits of Exit Planning for Business Owners
Below are some reasons why exit planning should be a crucial part of your business planning strategy as a business owner.
Higher Control over Business Exit
One of the most common regrets that most business owners express during or post-exit is not starting the exit planning process sooner. Proper exit planning allows owners to get the most money out of their business at the time of the exit. Moreover, it provides greater control over who takes over the business. As a current business owner, you can plan exactly when you exit the business, how to go about it, how much money you gain, and who will own the business after you.
Maximize the Largest Asset
According to the Exit Planning Institute, about 80% of the net worth of an average business owner is tied up in their business. Some may say this is putting all your eggs in one basket, which is not always the best business strategy. This is precisely why exit planning is crucial.
Exit planning will expand your business – your most significant asset – and make it more profitable for you and future buyers. It also ensures you have enough financial security to maintain your lifestyle upon exiting the business.
Gain Clarity
Timely exit planning allows business owners to understand what is important to them while running their business, as well as after exiting.
For example, business owners often initiate the exit by selling the business to a third party. However, if unexpected conditions arise, such as the need to close a facility, a reduction in operations, or a sudden loss of employees, the owner may have second thoughts regarding the sale. Early exit planning can avoid such chaos as it allows business owners to articulate their own needs and wishes for their business and valued employees ahead of time and plan accordingly.
Exit planning offers substantial benefits to business owners. Partnering with an advisory firm like Windes provides owners with access to expert advisors with the skills and experience to lead business owners toward their desired outcomes, creating a win-win for everyone involved.
Windes: Delivering Exit Planning Services for Business Success
Successful business owners are highly competitive and like to have control over their destiny. Exit planning provides greater control and allows owners to work towards important personal and business goals. With three in every four businesses expected to change ownership in the next ten years, now is the ideal time to start considering a tailored exit planning strategy.
It is not enough to build a business. You must also have an effective exit strategy in place to maximize your business’s value. Windes can help. We specialize in value acceleration, exit planning, and business transitioning plans.
Contact us today for more information.
