Exit planning insights: crucial for you and your business.

• Author: Laforest, Sara
• Position: SMALL BUSINESS

How much time do you spend thinking about exit planning? If you're like many small business owners we meet- not much. That's okay as long as you don't care about supporting yourself and your family when you retire or leave the business, and if you are not attached to what happens to the business, your employees and your customers after you leave. But in truth, the business people we meet do care. They care a lot- they just haven't done much about it yet.

Unfortunately, many business owners we encounter believe their business will just dissolve when they exit, and don't believe, or understand that their business could have value for sale. In developing your exit plan it is necessary to understand the two key reasons businesses have value and the three types of exits.

Your business can have value to grow the acquirer's business by adding or enhancing services or product lines and by removing you as a competitor.

Types of exits are involuntary (meaning your business stops growing and you go out of business), unexpected (due to death, illness or disability), and voluntary (retirement or proactive selling opportunity).

PLANNING IS CRITICAL

Exit planning (including a buy-sell-transfer agreement) is critical for you earlier than later because an exit plan better prepares you (the business owner) for the inevitable transition of your business- whether it's expected (intended), unexpected or the result of undesirable circumstances that can and do arise. Most business owners we talk to understand the voluntary exit, even if they are not currently planning for it. And they also understand--or perhaps a better word is fear--an involuntary exit. What is less discussed, but a looming reality like the proverbial albatross around your neck, is the unexpected exit.

An unexpected exit may be triggered by a biological event, what we have coined "The Biology of Exit Planning," including death, illness, disability, even becoming too old to effectively run the business. Due to the sensitivity of the topic, many people simply avoid discussing the unexpected, and then are left to deal with the muddle of unknowns amid the highly emotional and sometimes financial losses of an owner.

Regardless of whether the exit event is planned or not, at some point there will be a transition. So we ask again, how much time have you spent thinking about and formulating an exit plan that considers not only the planned exit options, but also the unplanned exit possibilities?

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