5 steps to successful exit planning

March 10, 2021

Steps to successful exit planning

Exit planning is extremely important to go over thoroughly when it comes to selling your business. Whether you are too busy, bored, or just ready for your next venture, you need to have an exit plan to facilitate the process. Here are the five steps to successful exit planning.

Evaluate your reason for exiting

You will need to evaluate your reason for leaving. Ask yourself, why are you leaving? Are you leaving to follow a dream or have more personal time? These are pull factors, or in other words, these ideas are pulling you in another direction.

Alternatively, are you leaving because you are bored with your current venture, reaching retirement age, or health problems making staying impossible? These are push factors, simply put, they are factors that are pushing you out of your current venture.

Know what type of exit you want

Next is to determine what type of exit you want; this is where you decide what kind of sale you want to make and how much control you will retain when you are done. Here are the different types of exits you may have:

Outright and walk away

This type is where you sell all of your shares in your company and walk away completely. You will have no say or control in anything else that pertains to the company.

If you are going for an outright exit, make sure that you time it so that you receive the most value for your sale. You will need to show prospective buyers why your company is valuable to receive the best payout.

Recapitalization

This exit is where you sell part of your equity and retain control of running part of the company. You would choose this type of exit if you still want to have a say in the future of the company while being able to go after new ventures.

Liquidation

If you are excited because you are tired and do not see a future for your company, liquidation would probably be the way to go. Liquidation means you sell the real assets of the company instead of the company as a whole. This type of exit is suitable when you feel your company may be hard to sell.

Hire a COO

In this exit, you will retain control of the decisions in the company, but a Chief Operating Officer will be running the day to day necessities. Exiting this way allows you to continue to draw a salary, be in control and still have time for the other things that are driving your exit.

Become a chairperson

As a chairperson, you will no longer have a role in the company, and someone else will be making the decisions. Becoming a chairperson means that you will be relinquishing your control of the company yet maintaining your shares and dividends.

Hand it down

This exit is when you give your company to your family to run and control. If your company is doing well, you might choose to hand it down to your children or other family members.

Employee buyout

In an employee buyout, your employees will buy and take over the company. This is an excellent option if your company is doing well and your employees have the knowledge to run and control the company on their own.

Generally speaking, a manager would buy the company or several employees may pull together to buy you out and retain the company and their employment.

Evaluate the value of your business

You will need to get a professional who knows how to value a business to find out the exact value of your company. After you seek the value from a professional, you will need to decide what your company is worth to you. When you have decided on a value, compare it to that of the professional. Then decide if you want to sell your business or try to raise the revenue and profits to increase the valuation.

You will know you are ready to sell when your opinion matches that of the professional valuation. You will also need to consider your reason for exiting. Your reasoning will play a large part in your assessment of your business.

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Know what role you want to play after the exit

A crucial part of any exit planning is deciding what role you want to play in the company after the sale. Depending on the type of sale you may choose a lump sum and walk away from the company altogether.

Another possibility is staying on after the sale to allow the new owners time to become familiar with their new acquisition. You will decide if you want to stay on after the sale and for how long you are willing to stay. You will need to consider this carefully. Do you want to stay and receive a more substantial sum, or cut ties and walk away with a lump sum after the sale?

Know what role you want to play after the exit

The final step is setting your achievement goals. What do you want to achieve from the exit of your company? For this, you will need to answer two questions. Is it important that you get the maximum amount for your company and are you willing to stay after the sale and for how long?

If you are financially secure outside of the sale and you want to maintain control of your company, your best option is to hire a COO to handle the daily business of running your company. If you want to walk away or stay for a short amount of time after the sale, your best option would be selling to a strategic buyer.

The key to a successful exit from your company is to prioritize your needs and follow through on them. For more information on how to plan exit and sell a business, check out the infographic below.

Sell your business for maximum value

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