Maven's Exit Planning Article

Are You Guilty of the 60/6 Imbalance As Relates To Exit Planning?

By Bill Quish, Mergers and Acquisitions Advisor & Certified Exit Planning Advisor


At a recent exit planning seminar, the presenter spoke about a truism that really caught my attention. What he was referring to was that the average business owner spends 60 hours planning for the start-up of a business but fewer than six hours planning for his/her one-time, life-changing exit from the business!  To put that in perspective, most business owners put in as much time planning for the eventual transition or sale of their business as they do in one round of golf!  Okay, now you all know that my golf game needs serious work!

Studies indicate that fewer than 30 percent of private business owners have an actionable exit plan. Those who do often have only one element, such as an estate plan or a management succession plan, rather than a comprehensive plan. Properly prepared and implemented, a customized exit plan becomes the “playbook” that makes the rest of a business owner’s life make sense. It addresses an owner’s personal, business, financial, legacy, charitable, community and retirement goals.

Success coaches like Tony Robbins and Brian Tracy constantly reinforce the important principle that the chances of getting what you want in life are substantially increased by the quality of the questions that you ask yourself. To that end, I have prepared a list of questions, the answers to which will hopefully help you understand the important and powerful value of a customized exit plan. The end of a year is always a good time to reflect on where you want to go with your life. This holiday season, set aside quiet time to thoroughly reflect on the following questions:

• Is it important to you to be able to control the exit from your business? (Being prepared means you get to decide when, to whom and on what terms you exit.)

• Is it important for you to objectively confirm whether selling your business to a family member or management will enable you to live the retirement you want? (Doing so may not support your retirement goals and can subject you to ongoing stress and financial risks.)

• Is it important for you to have a realistic assessment of your company’s current business valuation? (Many business owners have inflated views of their business’ value. In reality, the value of your business may not be sufficient to support your retirement goals.)

• Is it important for you to know how a professional buyer would view your company’s value drivers and weaknesses? (Given enough time, you can implement steps to improve the value and dress up your company for sale.)

• Is it important for you to understand how much in after-tax proceeds you will need from the sale of your company to support your retirement plans? (A wealth manager can calculate how much value your company must have in order to support your retirement spending goals. An exit plan will help you identify value improvements to increase your business’ value.)

• Is it important for you to minimize transaction taxes when you exit your business? (Transaction taxes can take a significant bite out of your proceeds at time of sale. Given enough time, you can implement strategies to reduce or defer the transaction tax burden.)

• Is it important for you to minimize estate taxes? (An up-to-date estate plan can minimize estate taxes and reduce the likelihood of your family having to sell your business, often at a lower-than-market value, to pay estate taxes.)

• Is it important for you to have a contingency plan in place for your company in the event of your sudden death or disability? (Without a plan for continuity of leadership, your business’ continuity and value are seriously threatened.)

• Is it important for you to preserve family wealth for future generations? (Without a customized exit plan, chances are that your legacy goals will not be met.)

• Is it important to you to have a plan for your life after the transition from your business? (Having well-thought-out plans in advance of your business sale or transition date is critical to happiness in retirement.)

• Is it important for you to have clear, specific, written goals? (Without them, you may get caught up in the current of life and miss your targets.)

• Is it important for you to have detailed, prioritized action plans to accomplish the above? (Your action plans should be prioritized and must not conflict with your goals.)

If you answered yes to the majority of these questions, you should make the preparation and implementation of an exit plan a priority. Typically, the more time you have to implement the plan’s action steps prior to your intended exit date, the higher the monetary returns and personal satisfaction you will receive on your investment. Having an exit plan in place will reduce your stress as well as family and employee uncertainty.

Bill Quish is a Mergers and Acquisitions Advisor and Certified Exit Planning Advisor (CEPA).  He is a senior managing director at Lyons Solutions, LLC.  He can be reached at 860-658-1845 or bill@mergermaven.com.

Copyright 2010 Bill Quish, MergerMaven.  All rights reserved.