Exit Planning – The 7-Step Process

exit-sign-1771787_1920My work focuses on making and keeping your business financially healthy and resilient by helping you cultivate and implement financial intelligence regarding cash flow, profitability, growth and much more. But the financial health of your business impacts an event that most of us don’t put much time or thought into – the inevitable point at which we choose to leave our business. An aspect of financial intelligence is developing an “exit plan” well ahead of the event – a plan which will likely affect how you do business today. To provide you with advice about exit planning I’ve called on my colleague and friend, Bob Zarlengo. His expertise as an exit strategist is backed by four decades of working with clients to make that eventual departure from their business a seamless process. Here’s what he had to say:

Eventually, the day will come when you decide it’s time to leave your business. This transition will likely involve the single largest financial transaction of your life so it takes some extensive planning – referred to as exit planning. What are the benefits of exit planning, how do you know when to start the process, and what does that process involve?

Exit planning helps you determine your personal objectives and identify your GAP – where you are now and where you want to be. You’ll know the actual value of your business and develop a well-executed plan to increase its value. An exit plan helps you identify the team of trusted advisors you’ll need to help execute your roadmap. But, how do you know if you should begin exit planning? I tell clients that they should begin exit planning if any of the following situations apply:

  • You are between the ages of 45-55 and control all or nearly all of the ownership interest in your business (70% or more)
  • Your personal net worth is tied closely to the value of the company
  • You are actively involved in the financial management of your company
  • Your business has a management team in place

By the year 2030, more than 70% of business owners will attempt to exit their businesses, yet 40% of all companies brought to market do not result in a transaction. Those that do result in a transaction include some seller concessions like contingencies, earn-out, reduced value, or seller financing. In order to improve your odds of a successful exit, an exit plan is essential.

Here are the 7 steps of the exit planning process:           

Step 1: Set exit objectives and lay the foundation for exit planning

In this step, you’ll begin by identifying your exit date. That might be 5, 10 or even 15 years in the future. You’ll determine the state of your company today and where it needs to be at the time of your exit, in other words, your GAP. You’ll also prepare your advisory team which may consist of a(n):

  • Financial planner
  • Insurance advisor
  • Investment advisor
  • Business attorney
  • Estate planning attorney
  • CPA
  • Valuation specialist
  • Business broker
  • Banker
  • Investment banker
  • Business coach

Step 2: Quantify financial resources

In step 2, you’ll identify business and personal financial resources, assess the value of your business, understand your current and projected cash flow, and consult with your advisors.

Step 3: Maximize and protect business value

Now, you’ll begin to take a closer look at your value drivers, and working towards maintaining them. These are things like:

  • A stable, high-performing work force
  • Sustainable systems
  • Diverse customer base
  • Good facility appearance
  • Realistic growth strategy
  • KPIs for financial controls
  • Cash flow, profitability, revenue, low debt
  • Attractive business sector
  • Having an exit plan

Step 4: Consider the potential benefits of ownership transfer to third parties

In this step, you’ll explore the possibility of transferring the business ownership to a third party. There are many pros and cons to this type of transfer, and you and your advisors will discuss the best solution for the company and the family.

Step 5: Consider ownership transfer to insiders

Perhaps there are co-workers, key employees or family members who might be a good fit for ownership once you exit. There are various insider transition strategies, including bequeathing the ownership, bonusing it, and gifting it, among others. You and your advisors will discuss the best strategy for you.

Step 6: Consider the benefits of business continuity planning

Business continuity planning involves achieving your business objectives even if you don’t survive the exit and ensures survival of the business for the benefit of everyone.

 Step 7: Create a well-balanced personal wealth and estate plan

This step involves addressing the protection of your personal assets, the management of wealth both now and in the future, and the promotion of harmony within the family.

Exit planning may seem to be a daunting task. Many business owners avoid creating an exit plan due to fear of the unknown, lack of clarity about their objectives, their identity is tied to the company, they think that only they can run the show, or they think they will never want to retire. But exiting is inevitable for every business owner. To achieve personal, financial, income and estate planning objectives each owner needs to obtain the maximum amount of money for his business. That can be accomplished only through planning. The more specific your plan, the more successful the departure from your business will be.

Guest blogger Bob Zarlengo has worked for more than four decades in public accounting. He is passionate about helping business owners achieve exit strategy objectives. For more information about Bob and his consulting services – which include financial reporting, income and estate planning, tax compliance, and transition planning – visit his website.  


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Rick Arthur is a CFO whose expertise is built on Financial Intelligence and 35 years in senior financial roles. Coupled with a CEO’s perspective and the experience of building his own $20 million company, he brings a unique depth of insight into business from the top down. Wired to get to know people, Rick works hand-in-hand with business owners of intentional, growth-oriented companies, solidifying relationships as a trusted advisor and confidant to his clients. He leverages his experience to help business owners gain traction and stay laser-focused on the company’s vision, cash flow, and profitability – all while creating big picture solutions for strategic planning, growth and sustainable success.