You Must Have A Post-Exit Plan for Your Business

Building your business venture to the point of a successful six or seven figures can be an exciting rush and form of exhilaration for an entrepreneur. Unfortunately, in the rush of doing things on a day-to-day basis, it’s easy to overlook the importance of developing a comprehensive exit plan and strategy for passing things on to a new owner.

Understanding Post-Exit Planning

Anyone who has been involved in a family business might have experienced the sudden departure of a key person without a proper exit plan. Unconventional or unexpected exits can significantly harm the business, especially if the intention is to sell. When this happens, those left behind often discover that the right strategies and tools are not in place. The situation could have been better if an exit plan had been properly executed.

An exit plan for business outlines who will be responsible for some of the most important components of running the business on a daily basis. If you are contemplating selling your business, then your exit plan might also include further details about what kind of person would be taking over the company, what employees might be transitioning into different roles to take on greater responsibilities, and the transitionary period in which you would be able to train the new party buying the business.

Exit Plan for Small Business

Now that you’re thinking about your future beyond being a small business owner, you’re probably wondering about how to create an exit plan for your business.

The type of exit strategy depends on the size of your operations. For those operating on a smaller scale, we list down every sample exit strategy plan for business operating on a smaller scale.

• Initial Public Offering (IPO): Go public if your startup is ready. It’s challenging, with scrutiny and regulations, but it can offer significant returns.
   
• Friendly Takeover: Sell your company to a trusted family member or a friend. While comforting, it requires delicate negotiations and can lead to complications if not all parties agree.
   
• Management Buyouts: Your employees take the reins. They understand the business, but securing financing and navigating complexities can be challenging.
   
• Employee Stock Ownership Plan (ESOP): Sell to an ESOP trust for employee benefit. It offers control and tax benefits but involves complex regulations.

Exit Plan Strategy for Business That’s Already Established

Liquidation: Gradually shut down your business, sell assets, pay debts, and close. It’s straightforward but can affect employees, vendors, and customers. Valuable assets can boost earnings from liquidation, though it may harm relationships.

Merger & Acquisition: Sell to another company. You might get a higher price, but it involves losing control and potential emotional challenges.

How to Plan an Exit Strategy for a Business

A business is a huge accomplishment. So, if you’ve decided to walk away from it, it should help you thrive even in the next step post-exit. To help you plan for your exit, consider the following factors.

• First, determine your business’s current market value. This influences every step you take. Working with a professional internet business broker can help you accurately gauge this value and avoid missteps.
• Next, assess the demand in your industry, as market conditions can shift rapidly. 
• Finally, reflect on your personal long-term goals—selling your business also means finding the right timing so you can achieve these goals efficiently.

Key Components of a Post-Exit Plan

• Begin with a professional business valuation of your company’s worth to understand its true value.
• Assess your financial situation and outline the benefits you expect from the exit.
• Keep yourself informed and updated about the current market situation and industry trends to time your exit strategically.
• Identify and develop potential successors to ensure the company’s continued success.
• Establish contingency plans to address any unforeseen circumstances that may arise during the transition.
• Ensure you have a clear process for satisfying any obligations to investors or creditors.
• Define your intended length of stay in the company to align your exit strategy with your long-term goals.

Personal and Lifestyle Considerations

Leaving your business can make you emotional. To some, it would feel like abandoning your identity and the relationships you’ve established.

Furthermore, it’s also time to set goals about the lifestyle you want to enjoy as you consider your business exit strategy. Ask yourself: Will the current price of my business fulfill my lifestyle needs post-exit? If the answer is yes, continue to strategize and search for “exit strategy for a business plan example” to gain insights and refine your approach. Otherwise, you may need to reassess your business valuation or explore alternative strategies to meet your financial goals.

Financial Aspects of Post-Exit Planning

Solid exit plans for business begin with a thorough financial needs analysis, identifying the funds required for financial security. Additionally, a well-prepared cash flow projection is crucial, guiding you and your advisors in evaluating exit strategies, ensuring smooth financial transitions, and preventing potential missteps. Both steps require professional input for accuracy and effectiveness.

Steps to Create Your Post-Exit Plan

• Financial planning. Every professional and personal expense and income should be accounted for. 
• Depending on the size of your business, pick the strategy that’s best for you.
• Pick the next person who’ll lead your business.
• Let your employees know.
• Inform your clients and customers about your exit.

Planning Your Next Move

The best thing about what happens post-exit is that you can do whatever you want. The journey, however, is different from one entrepreneur to another. While some opt to retire, others start from square one.

Planning for life after an exit should begin well before the actual transition. Test your post-exit ideas to determine if they align with your goals. Whether it’s starting a new business or exploring a passion, trial runs help verify if your plans will provide long-term fulfillment.

Common Mistakes to Avoid in Post-Exit Planning

Avoid the common mistake of neglecting to test your post-exit ideas. Remember that you want to secure the next stage so you can enjoy life with satisfaction after you exit your company.

An exit is just as heavy a responsibility as starting one. In other words, do not neglect the tax implications of moving on from your venture. Employ experts to determine which taxes your business might owe. Failure to do so will turn your exit into a huge financial burden.

Exit Plan for Your Business: How We Can Help

Several years before you make your exit, choose professional business brokers who can guide you in every step. From valuations to finding a buyer, Website Closers can help you. Call us today for a free consultation.