Understanding Exit Planning
The Significance of Having an Exit Plan
Everyone running a biz ought to think about their exit strategy — unless you plan to work until your last breath. An exit plan is more than just a farewell note; it’s a blueprint. Jot down your dreams for your business and yourself, and then plot the route to get there (source: Navix Consultants). This can not only boost your company’s worth but also help keep your stress low and lead to a graceful departure when you decide it’s time to step back.
For folks who own private companies, your business might be worth more than your beach house. Dive into exit planning now, rather than later, to ensure your financial nest egg and create a legacy that lasts. It’s a smart move to kick off the process a good five years (or more) before you wave goodbye NAVIX Consultants.
Exit Plans vs. Exit Strategies: What’s the Difference?
Many get tangled up between exit plans and strategies. They do dance together, but they don’t quite tango. An exit plan is like a dream board with a map of your goals and the steps to reach them. Your exit strategy, on the other hand, is the vehicle getting you there (source: Navix Consultants).
Here’s a quick rundown of exit strategies you might consider:
- Sell to an Outsider: This is a good ol’ fashioned “take my baby” to someone outside your circle.
- Sell to an Insider: Keep it in the fam – or the office fam. Pass it to an employee, a group of employees, or a co-owner.
- Hand Over to Family: Family tradition? Keep it going by passing the torch to kin who want to run the biz.
- Close Shop: Sometimes, just shutting everything down and moving on makes the most sense.
Don’t get exit planning twisted with succession planning. Succession planning is about making sure the place runs smooth when the boss changes. Exit planning is more about making sure you, the owner, can kick back and enjoy life with your finances and sanity intact (Navix Consultants).
For more info, check out our other guides: exit planning process checklist and creating a successful exit strategy. They’re like the combo meal to understanding your business exit.
Strategic Steps for Exit Planning
Getting ready to step away from your business isn’t just a matter of handing over the keys and waving goodbye. It’s got more strategy and steps than an Olympic relay, and you want to ensure that passing the baton—your company—goes off without a stumble. Two big-ticket items here: your timeline for getting out and putting together a superhero team of advisors.
Timelines for Exit Preparation
You can’t rush perfection, and that goes double for planning your big exit. Start cooking up this plan about five years before you plan to step aside. Yep, you heard right, five years! This might sound like forever, but it’s primo time to get your ducks in a row and side-step those pesky things that might trip up a smooth exit.
Here’s a nifty timeline to keep you on track:
| Timeframe | Key Activities |
|---|---|
| 5 Years Out | Kickstart your exit plan; figure out what you want out of it and who you might want to sell or handoff to. |
| 4 Years Out | Get your finances buffed up and your operations running slick. |
| 3 Years Out | Put a price tag on your business and scout around for buyers or successors. |
| 2 Years Out | Refresh any legal docs and get those taxes lined up. |
| 1 Year Out | Start rolling out the transition and keep everyone looped in. |
Each phase is like a piece of the puzzle—make sure all corners and edges are set perfectly to avoid surprises when exit day gets marked on the calendar. Still curious about timelines? Check out our exit planning process checklist.
Building an Exit Advisory Team
Here’s where it gets serious (and exciting)—assemble your crew! You’ll want to get this team of gurus together once you’re in that five-year countdown. These folks are pros and will keep you from tripping on tax traps or sidestepping legal loopholes.
- Exit Planning Consultant: The mastermind who makes your plan run like clockwork.
- Financial Advisor: Keeps a sharp eye on your company’s money matters.
- Certified Public Accountant (CPA): The tax wizard on call.
- Attorney: Your go-to for all things legal—sign here, don’t sign there.
- Estate Planner: Think ahead about legacy and sorting out your finances after exit.
Getting some outside pros involved means you’re free to keep the business shipshape while they sweat the small stuff and provide some newfound perspective (TGG Accounting). These folks aren’t just warm bodies; they’re your pit crew to ensure everything runs smoothly on race day.
For the full lowdown on why you’d be bonkers not to hire a pro, check out some expert advice in our exit planning consultant guide.
This team will help you steer through the ins and outs of leaving the business without leaving it in the lurch. And while you’re at it, dig into other topics like exit planning financial considerations and exit planning legal considerations for more ways to get the cons (and not the cons of pitfalls) in your favor.