One of the areas often overlooked by business owners in their planning is an exit plan. Whilst they may not be considering exiting the business in the near future, there will possibly come a time when you are considering it’s time to move on and you will want to ensure to the business is in good stead when you walk away which is why exit planning is so important.
There are any number of reasons the owner may wish to exit a business that they have invested (not just financially) so heavily into. The most common are retirement, realising the current value of the company, to start a new challenge / venture to name but a few.
Types of Exit
The main options an owner can exit their business are:
- Selling the business to realise it’s valuation
- Selling it or passing it on to the next generation
- Creating a succession plan; or
- Closing the business
Why the Plan is so Important
Whichever exit plan you decide on, to avoid complications it is imperative that there is a propr plan in place.
Failure to have a proper exit plan in place can not only put the stability and future success of the company at risk, but it can also put your own financial health at risk, so it is obvious that planning is incredibly important from both a business and personal standpoint. When you have a clear plan in place for your exit, it allows you to maximise the amount of money that you get from the business, ensure a smooth handing over and help the company to be in a good position moving forward.
The Exit Plan
Creating a high-quality exit plan is hard and the best type will depend on the size of your company, individual’s (yours and other employees) circumstances and the type of exit that you are opting for. For such a complex business plan, it is advisable to use an independent financial advisor who can assist with the financial planning around your departure as well as setting you up for the future whether this is constructing an investment portfolio or retirement planning.
Business owners tend not to think about what will happen when they walk away from the business but this is a time that needs to be planned for. Having a proper exit plan in place is important in terms of a smooth changeover, safeguarding the future of the business and ensuring that you are in a good financial position following your departure.
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