Exit Planning: Why Every Business Needs a Plan When it’s Time to Sell

In all the planning that goes into running a business, one critical detail often gets overlooked; an exit strategy. Many business owners have difficulty when the time comes for them to move on from their company simply because they do not have a detailed, organized plan to leave. 

Exit planning isn’t just about entering the next phase of your life; it’s also about making sure that your business is set up for success following your departure. It provides coverage for the many things in your life that could change after you leave. 

These include such examples as a change in marital status, disability or disease, litigation, and many others. There are many professional, personal, legal, financial, and tax questions that must be considered, which is why speaking with an expert consultant is highly recommended. Although closing the business altogether is a common choice for exiting, for the purpose of this article we will focus on the options for keeping it running.

Selling the Business

Selling to a third party is the most common form of exit planning owners employ when looking to move on. However, regardless of who you are selling to, these criteria must be met in order to create as smooth of a transition as possible:

  • Consider all of your options 
  • Speak with your investors 
  • Prepare your finances 
  • Tell your employees 
  • Choose new leadership 
  • Inform your customers/clients

Employee or Management Buyout

This is a great option for owners who don’t have a current or prospective buyer for their business lined up. And if this is your exit strategy from the start it can be a great recruitment tool as well. This will give you the peace of mind in knowing that the corporate structure you built will continue.

Phased or Transitional Exit

This is a way to begin your exit planning without fully leaving your company. A transitional exit occurs when a majority partner takes on a minority partner. This allows the new owner to be trained and ease into the management and ownership roles more smoothly.

Selling To a Family Member or Friend

In an ideal scenario, you would already have this person identified and trained before you decide it’s time to leave. It could be a son or daughter, a grandchild, or a friend. If however, you do not make this choice until you are getting ready to leave, it would be best to structure it like a phased exit.

Choosing Exit Planning Options That Are Best for You

With so many choices available for an exit strategy, the focus should remain on doing the right thing for yourself, your employees, and your clients/customers. Discussing these options with others who the decision will affect is important. 

However, discussing them with an expert who can help you is invaluable. And remember, exit planning isn’t something you should start thinking about once you are ready to move on, it should be something you consider before you even start your business.