Exit Planning is often overlooked until an owner decides to sell or even shut down their business. However, it is important that the short and long-term goals and objectives that drive your annual business planning aligns well with the business direction you require in order to achieve your Exit Plan or Strategy. This can be accomplished each planning cycle by always including an Exit Planning session throughout the process. The absence of an Exit Plan can impact your current business cash flow, growth initiatives, and even employee retention.
What is an Exit Plan?
An Exit Plan defines a business's long-term goals and provides a Roadmap for a smooth transition to the next stage in your business's ownership, leadership, or direction. Exit Plans and strategies may differ by business size, type and situation. The exercise hones in on a business’s value while defining the goals which lay the foundation for its future direction.
I may not exit my business for many years, what are the benefits of having a plan in place today?
A good Exit Plan safeguards Business Value and improves the predictability of your operations today. The business strategies and actions you implement each year will be done along with the guidance of your future objectives. If the short and long-term objectives are well aligned your success rate should improve and grow which improves current and future value while making your business more attractive to buyers.
Your Exit Plan will be a key component of your overall Business Plan. Key to the success of a Business Plan is good communication, employee involvement, clearly defined goals and objectives, and a system for everyone to rely upon and follow each day, week, and month. A well-designed plan can provide you with more than positive financial results. You may also experience:
● A smoother and more efficient business sale process
● Assist business brokers early in the process
● Provide banks with a far more attractive situation to provide buyer financing vs seller financing
● Allow for smoother transition post-sale with less need for interim consulting or hand holding
At the end of the day, your Exit Plan needs to fit your personal goals and objectives. Like Financial Planning, use the benefit of time to get out ahead with this exercise. It will at a minimum familiarize you with this inevitable process and help you avoid doing so in a fire drill manner. A good Exit Plan deserves your time and patience. Have fun with it and set a course for your future.