The Importance of Exit and Succession Planning for Business Owners

As a business owner, you've poured your heart and soul into your company. You've worked tirelessly to build it up, and you're proud of what you've accomplished. How do you ensure your legacy endures either a planned exit or an unplanned exit due to unforeseen circumstances?

If you don't have a plan in place, your business could be in jeopardy. That's why it's so important to start thinking about exit and succession planning early on.

Benefits of Exit and Succession Planning

Clarity and direction: An exit plan provides a roadmap for the future of your business, helping you to set goals and make decisions that align with your desired outcome.
Negotiating power: An exit plan establishes a framework for negotiations with potential buyers or investors, ensuring that your interests are protected and you receive fair value for your business.
Reduces uncertainty: Knowing what steps to take when exiting your business can alleviate stress and uncertainty, allowing you to focus on growing and managing your business with confidence.
Maintain relationships: A well-documented exit plan can help preserve relationships with business partners and employees by setting clear expectations and avoiding disputes during the transition process.
Prepares for the unexpected: An exit plan serves as a contingency plan in case of unforeseen circumstances, such as illness, disability, or the need for a sudden exit, ensuring a smooth and orderly transition.

Personal Story: "How an exit plan saved my business and the relationship with my co-founder"

Co-founder of BEJA Environmental, Inc, Byron Skaggs, discovered first-hand how having a business plan in place from the beginning saved his business and the relationship with his co-founder. It was a few years into operating their growing business, navigating the Great Recession, and making the necessary decisions to pivot the business model when Byron's co-founder abruptly announced he wanted out.

In most cases, many co-founders would be scrambling for what to do next. For Byron, he reached for the company's business plan. They had set up an exit strategy from the beginning of their start-up, and it laid out the steps they would take.

The exit plan allowed them to remove much of the emotion from the situation, follow a clear, pre-determined path forward, and maintain their friendship. Byron became the sole owner. He subsequently revised the exit plan to guide him, and ultimately determining to sell the company in 2015.

If you want your business to succeed, you need an exit plan. It keeps you focused, empowers you in negotiations, and reduces stress.

For many business owners, the decision to exit their business is a difficult one. They've invested so much time and effort into their company, and it can be hard to let go. But for others, it's a welcome opportunity to start a new chapter in their lives.

No matter what your reasons for exiting your business, it's important to have a plan in place. This will help to ensure that the transition is smooth and orderly, and that you get the most value for your business.

Preparing Your Business for Your Exit

The first question most owners ask themselves is, "When should I begin building my exit plan?"

The simple answer, "NOW!"

While it may seem overwhelming, you don't have to navigate this complex process alone. So, the first step in the process to build your plan is to gather your team. This team will likely include:

Your business coach
Your financial advisor
Your attorney (one experienced in business sale transactions)
Your tax professional
Your business' leadership team/partners

Working with your team, you'll begin by determining your goals for the exit. This will include things such as: the timeline and key markers for a planned and unplanned transition, how your exit will affect your personal financial situation, and whether the business transfers to internal or external investors.

With these goals in mind, your team will help you put together the steps and documentation necessary to put your plan in place.

Once in place, you'll want to review it each year as your company growths and thrives.

Exiting your business can be a complex and challenging process, but it's one that can be rewarding as well. By planning ahead and taking the necessary steps, you can ensure that your business is in good hands and continues to thrive, and that you get the most value for your investment.

Join Us: Crafting a Strategic Roadmap for Private and Family-Owned Business Succession

Infinite Ping offers a free quarterly webinar on this topic to help you begin crafting your unique succession roadmap. Click the button below to see dates and times of upcoming events.

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The Importance of Exit and Succession Planning for Business Owners

Benefits of Exit and Succession Planning

Personal Story: "How an exit plan saved my business and the relationship with my co-founder"

Preparing Your Business for Your Exit

Join Us: Crafting a Strategic Roadmap for Private and Family-Owned Business Succession

IPI Team