Okay, you've started your own business or purchased an existing business; worked nights and weekends to make it survive and grow; sacrificed time with your family; so what's your exit plan?
With increasing pressures facing business owners, there seems to be little or no time to devote to the question of what happens to the business when the owner wants to, or has to because of death or illness, transfer ownership. Most closely held business owners have spent a lifetime building their businesses, resulting in the business being the most valuable asset to accommodate retirement or investment in new ventures.
While a lack of exit planning is understandable, the results can be disastrous. A sudden illness, disability or death, with no succession planning in place, can cause chaos within the business and, ultimately, lead to the failure of the business or significant decrease in value. Even for the business owner considering a voluntary transfer of the business to a family member or third party, there are still significant planning issues that need to be considered before the process starts.
In the event of an involuntary exit from the business because of an illness, disability or death, the closely held business owner should be asking if there are significant management operational systems in place to allow the business to survive in his or her absence. Where multiple owners are involved, a buy-sell agreement must be in place and funded by sufficient insurance proceeds to allow for the smooth transition of ownership to the surviving business owners. With respect to a proposed sale of the business, the business owner should be focused on what the business is really worth and how they should reinvest the proceeds after transferring ownership.
It is never too early to start making an exit plan or to review a former plan to make sure that it continues to meet the business owner's needs. Remember the saying, "The best time to plant an oak tree was 20 years ago." What's your plan? We can help.