"Setting a goal is not the main thing. It is deciding how you will go about achieving it and staying with that plan.” ~ Tom Landry

 

Step 1 – Owner Objectives

 

Each business owner's unique objectives drive the creation of his or her Exit Plan.  Step One articulates and tests owner objectives so that the comprehensive Exit Plan focuses on achieving those goals.  Key exit objectives that will be identified as part of the Exit Planning Process include:

1. the owner's desired departure date,
2. the value that the owner wants or needs from the business, and
3. the individuals or entities to whom the owner wants to sell or transfer the business.

Step 2 – Business and Personal Financial Resources

 

Step Two determines what assets and earnings capacity owners have outside of the business, how much the business is worth, and how much cash flow the business can generate for Exit Planning.

 

The current value and projected cash flow, along with other non-business assets and income, are used to determine the paths and planning tools available to reach the owner's objectives. 

 

Step 3 – Maximizing and Protecting Business Value

 

The elements that build the value of a business or protect the value the owner has worked so hard to create are called Value Drivers.  In Step Three, owners and their advisors identify key Value Drivers and devise specific steps to maximize the value of the business and meet the owner's overall exit objectives.

 

Step 4 – Ownership Transfer to Third Parties

 

During Step Four, owners who want to explore a sale of their business to a third party will work with their advisors to identify ways to do so in a manner that results in the most beneficial sale price and terms.  Not all business owners go through Step Four; those who don’t either retain ownership long-term or skip to Step Five.

 

Step 5 – Ownership Transfers to Insiders

 

Step Five includes a detailed plan to transfer the business to insiders.  Insiders could include family members, key employees, or co-owners.  Careful planning in Step Five can allow the owner to both receive the desired value from the business and minimize risk.  At the same time, it is often necessary to rely on the resources of the business to collateralize and fund this type of a transaction as the purchasers have minimal personal capital.

 

Step 6 – Business Continuity

 

Step Six prepares the owner for contingencies that affect the business and its owners and key employees.  A complete Exit Plan incorporates potential changes, such as death or permanent disability of a key person so that the owner’s objectives can still be achieved.

 

Step 7 – Personal Wealth and Estate Planning

 

The sale of a business generates cash for owners and their families.  During Step Seven, owners and their advisors create a plan that not only preserves wealth, but minimizes income and estate taxes using both lifetime and estate planning tools.