Exit Planning

Exit planning.  This goes a step beyond ‘succession planning’, which sees the handover of the business as a faraway possibility, and not an immediate need.

An immediate (or very near) exit of the business is what we’re talking about now, and the people we’re talking to are those who are ready to get planning.  No more thinking that you might need to consider it one day – it’s here.

There are four primary reasons for an immediate exit to the business, and they are often known as the “Four D’s”:

Death – An obvious reason for things to come to a close.  We’re tempted to quickly cry out, “But we’re not being morbid!”, as you may expect us to, but there’s nothing morbid about being a wise planner for the future.  We’ve got absolutely no research whatsoever that death will pass you by, and every assurance that it will come in the end. Whether you’re afraid of that or looking forward to it is not a topic for this blog post:  we’re simply stating that this will change things as you know it.  And, as with the second D, it includes more than you think.  Perhaps the death of a dream, or a plan, or a friend, or a side business.  All those are deaths too, and can affect your current business.  The time to consider the issue of the death of a small business owner is right at start-up – and if it’s too late, do it now. Unfortunately, the issue of death is often only considered when you’re reviewing life insurance, and at that time you pretty much arbitrarily decide how much insurance you can afford and how much your company is worth, when this could be a great unknown.

Divorce – Again there’s the obvious one, and the sad circumstance for many marriages these days; but sometimes divorce refers to the breaking up of a business partnership.  You may have launched off with mutuality and warm feelings, but now it’s disintegrated into confusion, frustration, anger, and bitter words.  Whether it’s a personal relationship or a business one, divorce often results in exit.

Disability – A critical illness of any kind – whether it comes upon you personally or someone who is near and dear to you – changes everything about your involvement in the business, and its future.  From the dreaded ‘C’ word that changes your entire perspective on life, to a minor operation that pulls you out of the business for six weeks, any level of disability can result in an exit from the business – and sometimes that’s simply the result of stepping completely away for a period of time and re-evaluating what you want in life.

Departure – Perhaps for the moment everything is going well, and you and your business partners are all thrilled to be working together.  But what happens if your partner (or indeed you yourself) decides to leave for another opportunity or simply to take life easier. Who is going to do the work? What is owed the leaving partner? Where is the money coming from?

No matter which of the D’s applies, all the considerations above are critical to your business exit strategy, and the best time to consider them is before they occur, so you can work through the process objectively.  Any of the four D’s will be a situation fraught with high emotion, great uncertainty, and sometimes even a great about of pain.  Hardly the time for thinking clearly, acting rationally, and being gracious and thoughtful of others.

Here are a few tips for getting started:

• Review all your financial resources – your current situation and your expected future income, assets, etc
• Determine your financial needs.  What will the next twenty years look like?  What do you need to live on?  How do you want to live?
• Complete an initial business valuation (or multiple valuations on your resources)
• Consider business strategies going forward (we can help with this)

We are able to help you draft up a plan – but for now, you can get started by developing the following items for your business:

• Systems & processes documentation
• Organisational chart / job descriptions
• Branding changes
• Bookkeeping & accounting records
• Timeframe
• Definition of your role be going forward

This post was written by M3evolve