Exit Planning for Business Owners

In my recent article in the Sacramento Business Journal,


I talked about how to prepare your business for your exit.

In the article, I pointed out the need for reviewing the time you are spending on operating your business and delegating out the administrative portions, the need for cleaning up your financial statements and the need for documenting your processes.  I also noted that starting this planning years in advance of your desired exit time frame is key to its success.

However, there is another side to consider in exit planning when you are the owner who is exiting the business, and it is; “What does my exit look like in my personal finances during my retirement?”

There are many steps to consider in preparing to exit your business.  In helping owners prepare for their exits, we provide a two-staged approach to this planning.

Stage 1 provides you, the owner, with some ideas for how the business can provide for you during retirement and what the sale might look like in terms of a purchase with either an internal or external buyer.  Stage 1 includes:

  • Determining an estimated business value
  • Drafting exit plan scenarios for internal and external sale of your business interest
  • Reviewing various payout options under each scenario, while considering feasibility of the payout for the business
  • Determining the best tax scenario for payout options
  • Preparing a draft retirement plan which coordinates the payout from the sale & other retirement assets – we do this in coordination with our financial planners.

After Stage 1, you have an idea of what your personal income will look like at your retirement, knowing that your business, after being purchased by a new owner, can sustain the payments.

Stage 1 is conceptual but provides you with a road map for moving forward in planning your exit.

Stage 2 kicks in when there is an identified buyer or you are ready to find an external buyer.  Here we are putting substance to the scenarios we determined in Stage 1.  Stage 2 includes such things as:

  • identifying a buyer – either internal or identified external buyer or engaging a business broker
  • reviewing purchase methods and allocating assets if necessary
  • engaging an attorney to draft contracts & reviewing the contracts with the attorney
  • preparing tax projections for the various options
  • running feasibility numbers again for double check
  • and preparing an updated retirement plan with the actual purchase price and terms (this would also be in conjunction with the financial planning team).

There can be many years between Stage 1 and Stage 2 or they can be only months apart.  Doing this planning in Stage 1 though, helps you know how to prepare for your retirement years.  Getting a plan for this years in advance of your exit, helps you make changes on both the business and personal sides of your finances that will increase the likelihood of a successful exit for you & your business.

Contact us if you are considering your exit strategy and we will help you through it!