Planning Your Exit Strategy

Understanding Your Business Exit Strategy Can Provide Tremendous Peace of Mind

One day you will make the decision to sell your business. Whether that day is within the next few months or next several years, the time to start planning your exit strategy is probably now. Too many people wait too long and the results can be overwhelming. As we near the summer holiday season, many business owners – often baby boomers thinking about retirement – enjoy time with the grandkids and time away from work. But that can too often lead many people to make snap decisions about getting out quick. That is the worst way to plan your exit strategy. Building an effective team of advisors to facilitate a favourable exit strategy involves a close examination of the business and how to best position it for a successful sale. That team typically involves a lawyer who is aligned with your goals, an accountant that can help navigate the maze of tax issues and a trusted, confidential business broker who can help you understand the real market value of your business and who can professionally facilitate the sale of your business when the time comes.

Change is part of doing business and should be part of your exit strategy. Lawyers change practice areas and even a long-time lawyer may not be aligned with the direction you’re headed. The first steps in creating an exit strategy must address how to build a strong relationship with each of your team members and making sure they are the right advisors for you. It can take months or even years to build strong professional relationships. Taking a look at your team, right now, is a very good place to start planning your exit strategy.

You may need to restructure or reorganize your business to maximize its value. A seasoned advisor will help make that happen through a careful analysis. You may need to decentralize operational control slowly so that you can begin the process of stepping away from the business. All of these are issues that carry a great amount of emotional and psychological impact to business owners who spend years building a dream. None of it happens overnight, including the best exit strategies. That’s why The Alberta Business Exchange educates vendors through our detailed business valuation seminars in our private, confidential offices. Understanding the fundamental factors that affect the value of a business allows a business owner to make the necessary changes to maximize the future value of their business.

During the planning of your exit strategy, your accountant will be instrumental in determining your long-range plan. Do you pursue a share sale, an asset sale or another alternative? Many questions can be overlooked when it comes to the type of sale, and working with trusted advisors makes the difference between identifying the best strategies and overlooking them. One owner who was selling his company, for example, was about to sell the $2-million business, thought he had a good tax strategy in place, and learned the hard way that tax planning wasn’t properly addressed. When it came time to list the business, he found out he would have to pay an additional $160,000 in taxes under the structure he had in place – a significant hit. I’ve witnessed those stories first hand and the consequences can turn a smooth ride toward retirement into a long, bumpy road.

If you are a passionate business owner, as I am, you may be very focused on day-to-day operational issues that don’t directly deal with the big picture. Understanding how you get from where you are today to enjoying the next phase of your life can provide tremendous peace of mind. One business owner I recently worked with had lost the enthusiasm for his business, but was concerned about his financial security going into retirement. After a few hours, we determined that his business was worth more than he expected and that he could have comfortably retired a few years sooner and spent more precious time with his family and doing the things he really loved.

For most business owners, the next phase of their life represents the culmination of years of hard work and the realization of many goals and dreams. The strength of an exit strategy can determine your ability to reach this point. How well thought-out is your exit strategy?

Let us Become Your Business Sale Advisor

In a nutshell, our transaction advisory services are focused on you—your questions and concerns, and the emotions you experience throughout the process. We become another of your trusted advisors, along with your accountant and lawyer, someone who understands you, who you can lean on when you need help.