LSO Award

If you’re a business owner from age 45 to 65, raise your hand if you’ve begun actively planning for the time you will exit your business. 

Just as I expected, a paltry showing.

Given the small number of business owners who run their businesses according to a written plan, it isn’t surprising that the vast majority of owners of privately-held businesses have no formal exit plan in place.  That’s not to say any business owner who’s asked wouldn’t have a strategy of sorts , albeit in his or her head. (That’s the answer we usually receive when we ask business owners if they have a written business plan. Much more often than not, they say, “No, but it’s in my head.”)

An exit, or succession plan, is much too complex to keep track of in one’s head.  Too many potential players, too many options to consider and sift through.  And aside from your long-standing trusted advisors, it may be necessary to include advisors beyond your business attorney and CPA, with specialized skills necessary to a successful transition from business owner to whatever path you desire. 

The ideal path might begin with discussions with a “quarterback” helping you develop a plan and assemble the right team of advisors, regarding your personal affairs.  And another “quarterback” assisting you in decisions about your business affairs. Some business owners depend on their accountant to be the only quarterback, and that works in many situations.  However, if you have any of these kinds of issues, in addition to your accountant, you will be best served with experts in specific areas:

1. You are the business.  That is to say, you are the only face the customers see &/or you wear most of the hats in running the business.
2. More than 10% of your revenues come from one customer.
3. Your business  revenues have  been flat, or declining in the past 1-5 years.
4. A portion of your company’s value may be derived from intangibles, especially intellectual  property
5. You have family members in the business
6. You have a lean management team, which could not function optimally without you
7. Your margins have begun to erode
8. Your business may have a number of risk factors you haven’t addressed,  e.g. internet security, key employees, product liability…
9. You don’t have a clear idea about what you want to do with the rest of your life
10. You aren’t sure whether you can maintain a desired lifestyle on the earnings from selling the business
11. You will want to sell your business for the best price
12. You haven’t even begun thinking about your long-term needs.  You still have to put your kids through college.
13. You want to minimize your taxes, in compliance, on proceeds of the sale of the business
14. You want your business to be your legacy – you want the good work you did in the community to be continued, by keeping the employees with the business, and by keeping the business local, after it’s sold.
15. You don’t see how you can make the same financial returns after selling, that you get from owning the business.
16. You want a family menber to take over the business

Do you see where I’m going with this??

Planning to leave your business on your terms can be complex, and will take much more time than you may want to think about right now.  But if you truly want to exit on your terms, it is crucial that you begin the planning process 3-10 years before you are ready to exit, depending on the complexity of your needs.  Unless, of course, you’re willing to leave much to chance.

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