The answer to “Are you ready to plan your exit?” is always a resounding yes.
Exit Planning is not a process you, as a business owner, should come to when you start to either want to transition to a new business venture or look towards retirement, but it is the continual evaluation of your personal and financial goals in tandem with maximizing the value of your business.
What are my financial and personal goals in the next 3 to 5 years?
Understanding your personal and financial goals is key to timing your exit plan. Business owners should constantly be considering how their current business operations will impact their ability to exit the business and allow them to fulfill their personal and financial goals. Do you want to sell your current business to start new ventures for a recently discovered passion? Do you want to travel with your family? Or, are you looking to build your dream house on your favorite lake and spend your time enjoying nature? All these future plans can be achieved through the eventual sale of your business.
Additionally, as the average business owner has 80% of their wealth tied up in their business it is important to analyze your financial position to ensure that the profits from the sale will unlock your future goals.
What is the value of my business?
With around 80% of your wealth tied to your business it is the single most important asset you own. Although there are many factors that factor into the valuation of your business it is important not to overlook the areas of legal risk, including risk from regulatory agencies, that may devalue your business on the open market. Regular review of your legal and compliance needs can help achieve maximizing the value of your business as when you reduce risk for the business itself you reduce the risk for the potential purchaser, likely leading to a higher sale price.
If I had to transition, today, what would I like to see happen?
Life events can be unexpected, whether it is death or disability of yourself or a family member having an exit plan in place can preserve the value of the business. Knowing how you would want to transition your business in an emergency situation allows for a quick transition with maximized value. Asking yourself if you want the business to transition to your key employees, minority owners, a competitor in the industry, or a private equity firm with written exit plan should there be a need for you to exit the business quickly are important considerations to take.
An effective and advantageous exit strategy takes time and the proper due diligence to devise the right plan for your overall goals and objectives. The team at Jacko Law Group, PC (“JLG”) are helping firms and business owners navigate and strategize for their future. For more information or to speak our Certified Exit Planning Advisor (CEPA) Jeremiah Baba Pagano, Esq., contact us at (619) 298-2880 to schedule a consultation.