When Should You Start Planning to Exit Your Business?
The best time to start planning your exit from your business is when you start it up.
- this is the real world, and
- even if you do start planning that far in advance, you have to realize that your plans may change. Any altered circumstance affecting you or your business may have an impact on your planning, and if there is one thing we know about circumstances, it is that they can, do, and will change.
It may happen that what you want for the future of your business changes. It could be that a child who previously showed no interest whatever in your business is now fascinated by it and proving invaluable to you. Your partners may want changes to your Buy-Sell Agreement. A potential buyer you never looked for might make you an offer too good to pass up.
Notwithstanding the above, a clear-but-flexible exit strategy and plan can help you get and keep your business in good running order. In all your decisions, factor in the plain truth that one day, one way or another, you will not be running this business.
There are a number of ways you could exit your business when the time comes (whether that timetable is deliberately set by you or not):
- You may have partners willing to buy you out when you’re ready to leave (please make sure you have a Buy-Sell Agreement in force as soon as possible after the partnership forms).
- You may have one or more family members working with you who want and are prepared to take over when called upon.
- You may want to sell your business to an outside buyer.
- You may consider the business has run its course, and decide to liquidate the assets and retire on the proceeds (plus what you’ve saved toward retirement, of course).
- You could become ill, and be unable to run your business.
- ~50% of marriages end in divorce – you may need to buy out your spouse.
- You may die unexpectedly.
But, however you choose to, or must, exit your business, it’s in your interest to ensure that business has – and keeps – its ducks in a row against that day.
- Keep your corporate documents up to date and readily accessible. Update any corporate bylaws or other covenants which need it.
- Keep your financial statements up to date.
- Consider life insurance to provide for liquidity.
- Make sure your will is up to date.
- Ensure all your customer and supplier contracts are current and up to date.
- Maintain employee contracts and update them as necessary (e.g., promotion, lateral transfer between two positions, change in job duties, etc.).
- Leases, such as of real estate or equipment, should always be kept current – or terminated, should the real estate or equipment no longer serve your business’ needs.
- Update your business plan annually, to account for current realities and changing future goals.
- Make certain your team members have been cross trained to cover for one another in emergencies.
- All policies, processes and procedures should be thoroughly documented, step by step.
- In fact, document everything, and make sure you have an efficient and easily navigable filing system for electronic documents. Paper, unless mandated by governmental entities, is as a general rule optional in today’s world.
- Consult your trusted business advisor(s). This person is a major resource who can help you – take advantage whenever circumstances call for their expertise.
Some other considerations are personal – if you are a sole business owner with a family, your business decisions have an impact on them. Be clear about your plans, so as not to blindside your loved ones with a disposition of your business which comes to them ‘out of the blue.’ You don’t have to share each and every little detail, but it will pay off in family peace if they feel their voices are heard.
And if you are considering a potential sale of your business within the next decade, please don’t hesitate to call upon us. We can help you through every step.
Please click here to let me know how I can help you.
Until next time –