For most business owners, the eventual sale of their business is an essential part of their retirement plan. Yet, few are aware of the intricacies involved in such an important transaction. In fact, according to a 2015 survey, more than 78% of small business owners rely on their businesses to fund their retirement, which makes careful exit planning critical. In the lines below, we’ll explore the stages necessary for a successful exit strategy.

A well-crafted exit planning strategy contains four important stages: Pre-planning, Short-term planning, Negotiation, and Post-exit.

1) Pre-planning. The pre-planning is probably the most important stage in the process, yet it is common for many business owners to skip it and go straight to the short-term planning stage. The reason pre-planning is important is that it helps establish the big picture for the entire transaction. Generally, it is recommended that the business-owner begin the pre-planning process at least three years before the exit. In other cases, some might even say five depending on the size and complexity of the transaction. Some of the questions to answer during this stage are personal ones, such as family mission, tax implications, and company valuation. The business owner’s assessment of the company’s value is likely to be subjective, yet it will help in smoothing out the process for the road ahead.

The sale of a business, being the most complex transaction in finance, is not something that can be handled by any single professional or expert. Therefore, another key component of the pre-planning stage is for the business owner to assemble an advisory team that can help with the transaction. Usually, this team comprises of the following professionals: investment banker, accountant, estate planning attorney, corporate attorney, and wealth advisor.

Once the advisory team is assembled, their first task should be to help the business-owner formulate a sales strategy. Key questions that should be answered for this strategy are as follows: what are the business owner’s goals for the transactions? Assuming there are other stakeholders, do we know what they want? Has a market analysis being conducted?

During the sales of a business, things rarely go as planned. Therefore, another critical role for the advisory team is to assist the business-owner in laying out contingency plans for what-if scenarios.


2) Short-Term planning – Once the pre-planning stage is completed, it is now time to begin the short-term planning. This stage usually begins two years before the exit. It is mostly a review stage to update some of the works that have been done at the pre-planning stage, including the market analysis and cleaning up the company’s balance sheet.


3) Negotiation – There are different types of exit planning. For example, some business owners take their company public while others make outright sales. It is important to know the process for each and how they work. At the negotiation stage, it is also important for the business owner not to lose sight of their most important mission, which is to run and grow the business. The business-owner should delegate duties to some members of the advisory team if necessary.


4) Post-exit plan – while one part of your life has ended, another just begins. In collaboration with other members of your advisory team, especially your wealth advisor and your CPA, begin planning for what’s next. But, more importantly, don’t forget to celebrate.

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