I am starting a new series of blogs on Small Business Succession or Exit Planning to begin to better communicate the components of a successful plan. A properly planned business exit could make the difference between a comfortable retirement, or one where you just scrape by, worrying about money and the effects of inflation.
The first and most important step of the Seven Exit Planning Steps™ a Certified Exit Planner helps business owners identify is what their goals and objectives for their business are when they exit it. This first step helps make certain that the business owner understand the ramifications of his or her objectives, which is very important to a successful exit.
You, as a business owner, benefit from this first step in the process by clarifying your objectives and then prioritizing those objectives. The three universal objectives that must be clarified are:
• How much longer do you want to work in your business before retiring or moving on to another enterprise?
• What annual after-tax income do you want or need during retirement?
• To whom do you want to transfer the business? Is it a family member? A co-owner? Key Employees? An outside third party? An ESOP? Do you know if your intended recipient even wants your business?
Establishing these universal objectives unveils whether an owner has made correct or incorrect assumptions about what will happen when they ultimately leave their business. It brings you back to square one to consider how you are going to realize those objectives, preventing you from jumping ahead with solutions that may not exactly fit with getting you to your objectives.
If you know what you, as a business owner, want to do, and you have evaluated what you currently have, then an exit plan can be successfully created to help you reach your goals.