Smart Exit Strategies Begin With Early Exit Planning / by Kerri
It’s Never Too Early Or Too Late To Plan Your Exit Strategy
Early exit planning is essential for every business. On my radio show, Exit This Way, I open every show with the statement:
“It’s never too early or too late to plan your exit.”
Attorneys, wealth advisors, tax advisors and others all encourage early exit planning for business owners to minimize taxes; and to set up a variety of trusts to help you continue to control your company and its assets, while offering full protection for the business and your estate.
Paradox of Business Ownership
Don Brown, Vice President and Senior Relationship Manager at KeyBank opened his article, Smart exit strategies begin with early planning in the Kitsap Peninsula Business Journal by stating:
“What [most business owners] often fail to see and plan for is the byproduct of that success — that someday they will want or need to move beyond what they’ve worked so hard to build.”
That’s the crux of the paradox of business ownership.
There is a difference between exit planning and succession planning, but they must be addressed together because the decisions and outcome of both are intertwined.
I hear it many times a week: “I’ll walk away from my business when I’m ready to walk away. . . .” However, to successfully walk away when you are ready to walk away, doesn’t come together because you say so. There are many factors to consider, decide and prepare. The more prepared you are, the more control you have of timing, valuation, ownership, legacy; along with financial protection for you, the business and your estate. The earlier you start that planning, the more secure you can be that all the pieces are aligned and integrated to achieve your objectives.
Deciding when to exit, never mind which exit option you want to pursue, is non-trivial. The learning curve and execution of that decision is time-consuming for you the owner as well as your team of advisors.
Succession planning and exit strategy planning can be a distraction from running the day-to-day operation of your business. When you start early, you have control and flexibility to explore options and leverage your advisors to optimize your outcome. Consult your All-Star Team of Advisors early and often.
The risk of waiting until too late (and then needing to act fast because of health, business cycles, market conditions, business or family issues) is that you may leave up to 50% of the value of your business on the table, and share a greater portion of the proceeds with ‘Uncle Sam’. With good planning, that doesn’t have to be you.
Orchestrate Your Exit
As Don says: “a well-developed exit strategy is carefully connected to your overall business strategy.”
That’s why at This Way Out Group, we provide a Four Step Exit Strategy Framework™ to tie every strategic decision in the business, short-term and long-term, to your exit and succession strategy.
In parallel, your estate plan and exit strategy must be integrated to work in concert with each other. It takes a team approach to orchestrate how these different pieces work together. At This Way Out Group, we facilitate that team to cooperate, coordinate and collaborate in your best interest. Contact us to see how early exit planning can help you.