All business owners should consider an exit plan far before its implementation is necessary. An “Exit Plan” is a strategic outline of the transition out of your business. Whomever ends up purchasing your business, there are a few issues central to devising your ideal exit plan.
To begin with, when should you precisely begin planning your exit? Consider it if you are in one of the following situations:
• You control all or almost all of the ownership interest in the company;
• Your personal net worth is tied to the company’s value;
• The business has a management team;
• The business has been operating for over 10 years;
• The business has over 15 employees;
• Buyers have made inquiries about the business; and
• You are certain the business is marketable.
To be more specific, ten years before you exit is not too soon to plan for your exit. Many tax and investment strategies take time to structure. Thus, the more time you give to transition the higher the likelihood you, and your family, will have a secure financial future.
Matt Roberge, the CEO of SLC Bookkeeping says to begin sooner. “You should develop an exit plan for your business right from the very beginning. Having an exit plan in place will help you keep the business going in the right direction by constantly aligning with your long-term goals. An exit plan also creates a trigger event that means it is time to get out; otherwise you just keep going.”
It is imperative for a proper exit plan to consider the following:
• Your retirement goals;
• The value of your business currently;
• Tax consequences;
• Providing your family with financial security if the unforeseen occurs; and
• Maximizing income stream through your ownership interest.
Roberge also points out that an “exit plan will change over time, so make sure to review it often.” He suggests putting the plan down on paper and then reviewing it every six months to make changes or updates.
Exit planning has several steps, it can evolve, and it can constantly be edited. However, as a business owner it is important to start planning the end – for the prosperity of your future.
Call Virtus Law for your questions on business or estate planning. We have over 100 years of combined experience. Schedule an appointment today at Virtus Law by calling 612.888.1000 or emailing us at firstname.lastname@example.org.