3 Questions for Determining Your Exit Strategy

exitadvisors June 17th, 2013 Exit Planning

Knowing who you are is essential to determining what you want when exiting your business.

Setting your objectives is the first step in planning your exit strategy, and you should build around the personal values and goals that you hold dearest. In determining what you want from life, you will shape what you want from your business.

Maybe you want to cash out by selling to the highest bidder, then retire without looking back. Or, perhaps you would take less so that you can have more control over your company’s long-term direction.

After leaving, you might want to transition from success to significance by going to work for a nonprofit, or becoming a philanthropist. Or, perhaps you want to start another business.

Start considering your exit and what you will do next now, before you are ready to leave, so that you can transition smoothly from one phase of your life to another.

Owners who allow time to plan give themselves the greatest number of exit path options. They also obtain peace of mind, knowing that they have clearly aligned their objectives for the business with their personal goals.

Set your exit goals by answering these three questions:

1. How much longer do you want to work in the business before retiring or moving on?

2. What is the annual after-tax income you want during retirement (in today’s dollars)?

3. To whom do you want to transfer the business:

family?
key employee(s)?
co-owner?
outside third party?
Employee Stock Ownership Plan (ESOP)?

You also may want to set other objectives as well, such as:

Maintaining family harmony;
Providing for one or more employees;
Transferring wealth to family members;
Getting maximum value for the business;
Giving to charity;
Taking the business to the next level – with someone else’s money; or
Living a life of significance.

Many owners do not set exit objectives precisely because it is emotionally too wrenching to contemplate separating themselves from a business they have created, nurtured, lived with, suffered with, brought to maturity and in which they have totally immersed themselves.

But to transition successfully you must develop goal clarity, identify processes to enhance value drivers and create a roadmap for the inevitable exit from your business.

Consider, for example, how your decisions will impact employees, customers, family and other stakeholders, and act in accordance with your personal goals for them to bring about your desired result. That is, if you want a child, or perhaps a key employee, to ascend to your position then give them the time and attention they need to succeed.

Remember, your objectives direct all subsequent planning efforts and actions. Clarifying your values and goals now will allow you to exit successfully in the future.