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Target Departure Date
Without a stated departure date, you cannot create a road map for your successful exit. We suggest you set that date by asking yourself questions designed to help establish a time frame for your departure. You can plan your departure regarding when it occurs and how your involvement with the business changes and evolves. If you cannot visualize a future different from today, this is likely your starting point. Without a definition of what “departure” means, your exit planning will lack traction.
Preliminary Financial Needs Analysis
This analysis will help you to set and assess your financial wants and needs. The Financial Needs Analysis is not a financial plan. It simply tells you how much money you must receive from the transfer of the business to achieve financial security and independence. It results from a thoughtful review of your lifestyle, changing economic needs, non-business income streams, and other factors.
Target Successor
It’s your business, and most business owners expect to control who will take on the ownership interest in the future. Your exit plan should reflect your successor owner preferences, whether you prefer that your ownership transfers to a family member, co-owner, one or more employees, or an unrelated third-party buyer. Each target successor requires a different approach to exit planning. Identifying a successor owner sets you on a path for planning and preparation to accomplish your objectives.
Preliminary Valuation
A preliminary business valuation gives you and your exit planning team a reliable idea of how your business will contribute to your financial goals. Once you know what your business is worth, you can work toward exit planning solutions that allow you to receive full value for the company. If the value of the business today does not support your Financial Needs Analysis, your exit plan will emphasize value building as part of the comprehensive solutions and strategies.
Future Cash Flow Estimate
Cash flow drives your current income as a business owner. It will also fuel your continued ownership and your ultimate departure. A professionally prepared cash flow projection helps you and your advisors evaluate the likelihood of success of various exit paths. It can also prevent the exit plan from taking a wrong turn and establishes the financial structure on which you build your Exit Plan.
Time to Get Started
Exit plans consider your values and those you want your successor to maintain. A solid planning process will respect your values-based goals and find successors willing to commit to your most important values.
Planning also allows for adjustments to events that might negatively affect your business, such as economic downturns or changes in the competitive environment, affecting cash flow. The time you spend planning will help minimize risks later.
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