When I ask business owners “Do you have a Business Exit Strategy?” the usual response is either, “I guess I’ll just sell the company someday” or “I’m looking for a successor” or more simply, “I’m working on it”. All of these answers reflect a great reluctance on the part of the vast majority of business owners ( me included) who are simply so busy running their business or professional practice that they simply don’t want to address the issue.
As John Leonetti points out in his book, “Exiting Your Business, Protecting Your Wealth,” the reality is that ALL business owners will one day exit their business. The real question is whether you are working on a plan or strategy to do so. Planning to exit your business is a lot like taking the time to hire an attorney to prepare a Will, Financial Power of Attorney, and Advance Directive for you and your family. Everyone understands that no one gets off this earth alive (as we know it), but thinking about your own death is something many people are reluctant to do.
Business Exit Planning is no different. As a result, many people die without a valid will, and many business owners simply “die in the saddle” as the old Cowboys used to do. In thinking about business exit planning, many business owners think an outright sale of the business in the only option. In reality, an outright sale of the business to a willing third party buyer is really only one option. The best definition of business exit planning is that it is a process that helps a business owner to regard his business as a non-liquid asset, and developing a plan to covert this non-liquid asset into a stream of income for his retirement years or a legacy for his family or favorite charity. In this sense, business exit planning is more fun than estate planning because you are working on a stream of income that you actually can enjoy.
Serious business exit planning is a process whereby the business owner typically engages the services of an attorney, an accountant, and possibly a financial adviser or insurance agent or stock broker to provide input to formulate a strategy for the owner to exit his business in a three, five, or ten year period. Most business owners have professional advisers already who fit these categories, but many professional advisers lack the background or knowledge to help a business owner decide which business exit option will work best for a particular owner, and his particular business. Many professionals’ business model is focused on keeping the business owner client tied to his business until he dies in the saddle. After all, if the owner sells his business, the firm has lost a client, and it may take time to make up for the loss of income from professional services that were used by the business.
For an attorney to provide valuable business exit advice, the lawyer must be well acquainted with handling business sale transactions, shareholder stock purchases and agreements, litigation experience for asset protection, estate planning expertise, and familiarity with corporate finance options. The lawyer also needs a strong network of accountants, financial advisers, and insurance professionals to assemble the team necessary to help an owner with the exit planning process. At McKenzie Law Associates, we have the knowledge, experience, and professional network to assist business owners with what might seem a daunting task.
In actuality, business exit planning begins with the decision by the business owner that says: “Yes, I will begin a plan to exit my business, even if that date is five to ten years away”. Your business has provided you with a stream of income for many years. For most business owners, a great deal of their personal wealth is tied up in their business. Your business is not just “a job”; it’s “an investment.” Begin to create a plan to convert this very valuable, but non-liquid investment into a stream of income that you and your family can enjoy at a time that works best for you.