Updated: Jul 19, 2022
So many business owners I talk to know they need to prepare for an exit, but they don't know where to start. Starting with the end in mind, is sage advice for all business owners, from start-ups to multi-generational. Your Owner's Exit Plan is the first step for ensuring you will have a great exit when it is time to sell your business.
Your exit plan has 3 key components which will give you the base knowledge you need to prepare yourself for an exit so you can have the personal & financial legacy you truly want from your business.
The first part of your exit plan is your personal legacy plan. This is where you assess how ready you are personally & emotionally to exit. Then consider the legacy you want to leave for your family, employees, customers, suppliers, partners and community. How do you want to be remembered? Lastly, you need to have goals & a clear understanding of what your life after exit looks like. What will give it purpose to make it even bigger & more meaningful than life before your exit?
The second plan is your personal financial plan. This is documenting your current financial position considering all your sources of income & wealth today. Then you need to assess what your ideal life looks like after your sale & the financing needed to support it. Based on these two endpoints you will know your wealth gap which will need to be covered by the sale of the business. We recommend you get expert advice in preparing your personal financial plan as they will ensure you consider all sources & uses of funds & how best to manage them in the short & long term to ensure your success.
The third plan, your business financials, extends from your personal finances as it is about understanding what the business is worth today, what you need the business to be worth for a successful exit & the things that need to be changed in the business to bridge that value gap. Bridging the business value gap is typically a major transformation within the business where you will need to empower the leadership team to make the changes needed to grow the company regardless of your involvement. For your team, the issue of your exit is only a distraction, for them, you empowering them to create & act on their vision of the next stage in the company's growth, is what will excite them. They intuitively know that their financial & job security is based on them building a great company where they as a team are key to its success.
Your plans need to be documented, having them in your head is not good enough. A documented plan is something you can discuss with your exit advisory team, your spouse & family. Then the next step is the most crucial, it is taking those plans & executing them to make your great exit happen.