5 Ingredients of a Successful Business Exit

Posted by Christian Wynns on May 31st, 2016

Business owners will be retiring in droves over the next ten years, which means they will be considering their options for passing the business on to family or key employees or to selling the business to someone else.

This process will be a new experience for most owners since chances are they’ve never tried to exit a business before. Mapping out a plan to exit the business can help owners avoid unnecessary or excessive taxes, minimize risk during the transition, and realize the full value of their life’s work.

A successful business exit will have five ingredients:

1. A written exit plan.

2. An experienced team of advisors. Accountants, brokers, other valuation professionals, lawyers, financial advisors, and insurance advisors are among the professionals that provide exit-related services.

3. Cash flow and a qualified business value. Determining the value and which financials influence value is a key step.

4. A strong management team. This team can either make the business more attractive to a buyer or can help make a successful transition to employee or family owners.

5. Time. Ideally, business owners will be planning three to five years in advance of an exit. A large number of business owners who haven’t begun exit planning think their business is worth four to five times what it’s really worth. A good advisory team can get the owner where they need to be, but time is needed.

Combining these five ingredients will make the process of exiting a business go more smoothly. Professionals with the right resources and tools can help – not only with establishing the process but also moving the plan forward while reassuring the owner along the way.

Talk to your CPA today!

Mary Ellen Biery, Accounting Today, May 2016.