When planning for a vacation, do you typically jump in the car and just start driving without first determining where you are going?
No, of course not. You plan out where you want to go, when you want to leave, what activities you want to do on the trip, and so forth. You create a plan to make sure that you know where you are going and what you are going to be doing.
The same principle applies to business owners when transitioning from their business. Without an exit plan in place, the odds of reaching your end goal are extremely low. Only by implementing a comprehensive plan with actionable steps do you stand a chance of making a successful exit from your business.
To quote baseball great, Yogi Berra, "If you don't know where you are going, you'll end up someplace else." Without a detailed exit plan in place you may find that your destination may not be where you want it to be.
While you may think you're headed toward retirement and many years of well-earned relaxation, without a plan in place you could find that retirement is just out of reach or that you'll have to work well past the age in which you thought you would. Many small business owners spend their entire lives working on their business, adding value to the bottom line and developing strategies to build their customer base, only to find that it's nearly impossible to sell the business when it comes time to retire.
If you don't have a plan in place this can come as a real shock. What do you do then? You may get lucky and come across an "angel investor" who will buy you out at the right price, but the odds of that happening are slim to none. It's more likely that you'll end up caught between a bad option and an even worse choice.
Unfortunately, as many business owners near retirement they find themselves in this precarious position because they never developed a real exit plan on how they will ultimately leave their business. This isn't to say that business owners aren't good planners. Most owners wouldn't have a successful business if they hadn't developed an in-depth plan long ago on how best to operate their company, so it's profitable and set up for long-term growth.
The problem is that a business plan is not the same as an exit plan. While a business plan helps keep the company on track, it isn't enough on its own because it only addresses the needs of the business, not the individual goals of the owner.
A true exit plan involves the creation of foundational objectives and the execution of a strategy to implement those goals that is actionable and leads to the owner leaving on their own terms. It typically involves support from a wide range of experts, such as an exit planning adviser, attorney, financial adviser, and certified valuation analyst, among others, so that all areas of the exit are considered.
This plan is an established process that lends itself to success. While no plan is foolproof, a plan that's never implemented has no chance of success, which is why it's so imperative to develop a thorough and actionable exit plan now and not wait until it's too late.
Steve Douglas, Director, ExitMap Express Advisor, is a leader of Porte Brown's Exit Planning practice group. If you have any questions, please feel free to contact Steve Douglas at 847-956-1040.
Porte Brown offers one of the few exit planning programs specifically designed for small businesses, Exit RoadMAP Express, and hosts a free monthly webinar series that outlines various options specifically focused on the needs of main street business owners.
Note to Readers: This article was originally published in the Daily Herald Business Ledger.
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