The 7 Things a Well-Constructed Exit-Plan Addresses

The 7 Things a Well-Constructed Exit-Plan Addresses

If you’ve been a reader of this blog for more than a few minutes, you know that a strong exit plan is absolutely essential if you want to sell your company on your terms for your desired price according to your timetable. There’s simply no other option.

Hopefully, you’ve been working with a CFP professional or CPA to put an exit plan in place. (If not, don’t fear. Read our blog post “Waited Too Long? 5 Exit-Planning Tips for Procrastinators.”) But how can you tell if the plan is a good one?

In my book Walk Away Wealthy I share the seven things a well-constructed exit plan addresses. Here they are:

1. Exit objectives: This should be the very first thing you discuss with your exit-planning professional. What do you want out of your sale? What kind of income are you envisioning post-sale? What other characteristics constitute a successful exit in your mind? These should all be answered in your exit plan.
2. Your current financial condition: A good exit plan will not only address how much your business is worth, it will also help you understand how much you need to fetch from the sale in order to support your desired lifestyle.
3. The best ways to increase the saleable value of your business: Your valuation isn’t set in stone. You should work with your CFP professional or CPA to determine the best ways to increase—and preserve—the value of your equity, such as lowering risk, broadening your client base, and protecting your intellectual property.
4. Tax minimization strategies: Taxes can take a huge chunk out of your liquidity event. Tax minimization strategies are an absolute must. These strategies can take years to implement in some cases so this is something that should be part of your exit plan from the very beginning.
5. Options for transferring your business: If you’re considering an internal transfer of ownership to a family member or employee, your exit plan should address how you can do this successfully—without losing control of your business while paying the least possible taxes.
6. Options for selling: What will the sales process look like? Your exit plan should outline how you’re going to find your ideal buyer, what represents a good deal, as well as who will handle due diligence and negotiations.
7. Preparation for the unexpected: Undoubtedly, you want to make sure your family is financially provided for in the case that you die or become disabled. Does your exit plan have a business continuity plan in place that ensures that your business and its income will continue in this event? It should.