No matter how successful or well-run a business is, every owner will eventually leave it—voluntarily or not. The timing and terms of that exit are often dictated by unpredictable or unavoidable events: Death, Divorce, Disability, Distress, Departure, and Disagreement, among owners. Without a formal business exit plan, these events can erode value, create personal and financial turmoil, and leave legacies at risk.
Over 50% of owners want to transition out of their businesses within the next 10 years, regardless of their day-to-day involvement1.
That’s why exit planning isn’t just for business owners nearing retirement—it’s a vital, strategic process for every stage of ownership.
All owners will exit. The question becomes, what path will they take?
These are essential questions in crafting a successful exit plan. Without clear answers, business continuity and your financial future can remain uncertain.
Accurate financial data is the cornerstone of any sound exit plan. However, many business owners lack up-to-date insight into their own enterprise’s worth or cash flow sustainability.
Key Questions to Ask Yourself:
The answers to these questions may influence the viability of your exit strategy, the timing, and the financial security of your next chapter.
How to build a comprehensive Business Exit Plan by including the following components:
Consider the health, transferability, and attractiveness of your business. Increase the value of your ownership interest, protect the business value you’ve created, and minimize income taxes when you transfer ownership.
Prepare for a potential sale that maximizes your cash and minimizes your risk and tax liability. Some sellers have an investment banking firm hold an auction, inviting multiple qualified buyers. This maximizes your leverage, allowing you to set the sale price and deal structure.
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Alternatively, compare transferring the business to co-owners, family members, or other employees. Often owners choosing this option are looking to maintain the culture they have built and to reward those who have helped grow the business into what it is today.
Plan for unexpected disruptions to ownership or leadership, such as death, permanent, or temporary incapacity. Consider who will have responsibility for supervising business operations, financial decisions, and internal administrative functions. Additionally, take into account how the people you choose will be compensated and their receptiveness to work until the company is transferred or potentially liquidated.
As you are preparing your exit plan, consider how you can protect and grow personal assets to support your life beyond the business. Provide for your family’s financial well-being after the transfer and if you pass or become incapacitated before the business is sold or transferred. Ensure you and your business partners have the liquidity necessary to meet your financial objectives, especially if business interests are to be sold to business partners in the event of death or permanent disability.
So, what’s in it for you? What’s the value in making a plan? There are three main value propositions for a business owner to create an Exit Plan:
You deal with risk every day, but how often do you unintentionally take on unnecessary risk? Sometimes there are unexpected changes that take their toll, or deals fall through at the last minute. An Exit Plan identifies these and other issues and addresses them in advance. In coordination with your other professional advisors, the plan reduces the possibility of taking on unnecessary risk as you plan for your most important business event: your eventual exit.
When you sell your business, you want to get the maximum value. This may not always be the highest sale price – it’s more about getting the most of what you value, whatever that may be: time with family, reduced stress, maintaining a business culture, continuing your legacy. Perhaps it’s a successful continuation of the business with family at the helm, continued employment for your loyal employees, or recognition in the industry. Whatever you value, that’s what we help you achieve.
Finally, but most important, keep yourself – the business owner – in control until you are ready to make the move. A departure from your business should always be on your timeline and terms, not someone else’s. Most business owners would rather control their own destiny than let it happen to them.
Exit planning isn’t about leaving your business tomorrow. It’s about preparing today, so when the time comes, you’re ready to exit on your terms. Let’s talk about where you are in the process and how to start building a plan that’s right for you.
We encourage you to contact your dedicated Webster Private Banker or Timothy Throckmorton, Senior Managing Director, Financial Planning, to discuss how a Business Exit Plan may help you meet your long-term personal and business goals and objectives.
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