Your exit plan must include these six essential components:
- A concise statement of your business, personal and family/estate goals
- A detailed business valuation to establish a baseline value for the business
- A plan to help you identify specific ways to enhance the value of the business
- An analysis of the pros and cons of your different exit alternatives, such as a third-party sale, management buyout, family succession, or liquidation
- Suggestions to minimize any capital gains, ordinary income and estate taxes related to the exit
Exit planning is a great contingency tool-while no one likes to think about unfortunate life occurrences, a good exit plan includes contingencies for illness, burnout, divorce and even death. Without a well-thought-out survival plan, there could be very serious consequences to the owner's family, employees and customers.
A contingency plan shows the owner's heirs and advisors what the owner would like them to do with the business should something unfortunate occur. Without continuity in leadership, the business most likely will fail. Having a plan in place will bring a sense of security to your family, employees and colleagues.