Issue 105

Preparing for Your Exit

Planning for Your Inevitable Business Exit

With over half of today’s 9.5 million owners of established businesses reaching the retirement age of 50 years old or older,1 it is more than likely that many of you will be ready to leave your business within the next decade or so. In fact, recent reports suggest that 71 percent of small and mid-sized business owners plan to exit their companies within the next 10 years.2 However, only 22 percent of you have reported doing a great deal of succession planning.3 So what are you waiting for? Don’t you think you should put plans in place to prepare you and your family for one of the biggest financial events of your life?

According to a recent article in the Wall Street Journal, 55 percent of surveyed retirees said they were living in retirement on 95 percent or more of their pre-retirement income.4 These figures indicate the importance of creating an Exit Plan today that enables you to help achieve your financial and lifestyle objectives after you leave your business. If you have been uncertain about how to begin preparing for your voluntary –and inevitable exit – because you don’t understand the process or even know who to turn to for help, don’t fret. Fortunately, a deliberate, adaptable and customized Exit Planning Process exists that business owners and their advisors have been using over the years to ensure that owners leave their businesses on their own terms and on their schedule.

Exit Planning is neither mysterious nor time-consuming. The purpose of Exit Planning is not to sell you a product – it is to achieve your financial and lifestyle objectives. Business owners achieve their Exit Objectives when they leave their companies when they want, to whom they want and with the amount of cash they want. Exit Planning provides owners with the keys to running their businesses so they can leave them in style.

What exactly then is an Exit Plan that will allow you to leave your business in style and how do you create it? Certainly, there is an almost infinite variety of businesses and business owners. Consequently, each owner’s exact Exit Plan will vary, yet almost all contain common elements.

To give you an idea of where you stand in developing your Exit Plan, please review the following questions. If you can answer “yes” to all of the questions, then you are well on your way to developing a successful Exit Plan. If you are like the vast majority of business owners; however, these questions will highlight areas where you need to focus your Exit Planning efforts.

  1. Do you know your primary planning objectives for leaving the business, such as:
    1. Departure date?
    2. Income needed to achieve financial security?
    3. To whom you want to leave the business?
  2. Do you know how much your business is worth?
  3. Do you know how to increase the value of your ownership interest through enhancing the most valuable asset of the company –the employees?
  4. Do you know the best way to sell your business to a third party, which maximizes your cash, minimizes your tax liability and reduces your risk?
  5. Do you know how to transfer your business to family members, co-owners or employees, while paying the least possible taxes and enjoying maximum financial security?
  6. Have you implemented all necessary steps to ensure that the business continues if you don’t?
  7. Have you provided for your family’s security and continuity if you die or become incapacitated?

If you are like the majority of business owners, you will only be able to answer “yes” to a few of these questions. If you are going to successfully exit your business, though, you must be able to say “yes” to each and every one of the questions listed above.

The next three The Exit Planning Navigator® issues will discuss the advantages and disadvantages of various exit paths, such as transferring ownership to children, selling to key employees and selling to an outside third party. Understanding these paths will help you in formulating the timing and details of your Exit Plan.

Subsequent issues of The Exit Planning Navigator® discuss all aspects of Exit Planning. If you have questions, please contact Kevin Short, Managing Partner & CEO (

1 Feldman, Dr. Stanley J. and Winsby, Roger, “Financial Service Needs of Established Business Owners: The Size and Demographics of a Wealthy Underserved Market,” Axiom Valuation Solutions, formerly bizownerHQ.

2 Canadian Federation of Independent Business (CFIB), “Is Your Business Worth What You Think It Is?” Deloitte & Touche LLP - Canada (English), Posted June 25, 2006.

3 Pricewaterhouse Coopers, “Trendsetter Barometer,” released January 31, 2005.

4 The Wall Street Journal, “The Retirement Lies We Tell Ourselves,” December 11, 2006.