Business owners are accustomed to reading and hearing about exit planning, yet there is often a misunderstanding that it is a cumbersome project that will take time away from running a business. Instead, exit planning is simply a component of good business that yields a more comprehensive business plan, clarifies goals, and improves your likelihood of success.
2024 could be the ideal time to turn your attention to building exit planning into your business strategy. As a first step, let’s review the basics of exit planning.
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What is an exit plan?
An exit plan documents how a business moves toward long-term goals and allows a smooth transition to a new phase, whether that involves selling the company or transferring ownership to a key employee or family member.
Everyone who goes into business will one day exit it. The question is, on whose terms do you want this to happen?
Exit planning has value now – as you are building your successful business – and later, when you want to exit for profit. Growing a business and a successful exit both require thinking strategically – looking forward, forecasting, and developing a strategic plan that is focused on business value optimization, and that translates into how the business is operated. Business building and exit planning can be done concurrently. In fact, having an exit plan provides a thorough, far-reaching business plan with the agility built in to change direction if and as needed.
Why are business owners hesitant to make exit planning a priority?
Most business owners view their exit as something far into the future, so it does not feel like a priority. Exit planning is also perceived as something that will be difficult or take a lot of time away from running their business. Other common fears and perceived obstacles include uncertainty about life after the business is sold and whether the business can run without them, concerns about external economic and industry trends, and not knowing where or how to start an exit plan.
Why exit planning is just good business.
Leaving their business, for whatever reason, is not something business owners like to think about. They prefer to focus on building their business today. And that’s exactly as it should be.
When you are building your business most effectively, exit planning is a natural result because it requires strategic thinking with an eye on the future, then acting on that strategic plan. The alternative is to simply react to whatever happens – whether that is in the global economy and markets, your industry, your community’s economy, or issues within the walls of your own company.
Once you identify your ultimate “destination” and when you want to arrive, you can map out the process and take the steps to get you there, with enough agility built in to adjust your route if and as needed. When you’ve done this work – surprise – you’ve also created the foundation and structure of an exit plan.
One of the most effective ways to grow your business is to develop a strategy focused on value optimization, that carries over into how the company is run. Maximizing the value of your business is also the focus of a good exit strategy and the key to accomplishing both long- and short-term goals. By staying on top of your numbers, forecasting, and adjusting as necessary along the way, you execute your business-building strategy, which also leads to a successful exit.
Moving Forward
As you begin taking the initial steps to adjust your business strategy to incorporate exit planning, there’s a highly effective way to maximize your efforts moving forward and that’s by joining like-minded business owners on your collective journey. This is why we created the Exit Planning Peer Advisory Board (PAB). Meeting every other month, we focus on building business now with an eye on your exit. In the process, this business owner peer group is building the future they envision for themselves, their family, and the company they will eventually step away from. It’s an invaluable opportunity to share challenges and solutions, and to help each other remain accountable to their company and themselves. As a seasoned exit strategist helping numerous business owners get to their next act, I’ll meet with you, one-on-one, in opposite months, to drill down and address issues that are unique to you.
An early member of our PAB who has recently joined us again, expresses its value well. Thanks for your kind words, Jim. “I was a charter member of Bob’s Exit Planning Peer Advisory Board when he initiated it back in 2017. Through my participation on the Board and my work with Bob I crafted an exit strategy that enabled me to sell my company 2½ years later, at which time I stepped off the Board – it had done its job for me. I’ve stayed in touch with Bob over the years because he thinks like an entrepreneur. Every time I have one of my crazy ideas, I need to talk to Bob. He always has great insight and ideas to share. As I continue to work on growing my estate, I still have Bob’s CPA firm do my tax work to ensure that I’m minimizing income tax and Bob keeps an eye on the residual estate I’m creating. I enjoy my periodic meetings with Bob and another chance to pick his brain.” – Jim Elmore
Contact me for a complimentary consultation, to learn more about value-based management and exit planning, or to be a guest at our next PAB meeting.
Bob Zarlengo is a certified exit strategist and CPA. With more than four decades of experience in public accounting, his expertise in financial reporting, income and estate planning, and tax compliance makes him a valued and trusted advisor to his clients.