Proper planning prevents predictably poor performance: the six P's of business exit and succession planning process.

• Author: Bannon, Mel B.
• Position: BUSINESS BASICS

Exciting a business while also ensuring the pH succession of management and control is a process, not an event. There comes a point in the lifecycle of any business when the owner no longer wants to, or is able to, manage the firm. Since the timing of retirement, death, or a disability is difficult to predict, it's prudent to have a succession or transfer plan in place now to protect the value of your business, safeguard your personal financial well-being, and provide your business with leadership during a transition period.

However, as the old saying goes, "We don't know what we don't know." Whatever vague or preconceived ideas we may have of how and when we might exit our business, the fact remains that there are many different options, exit paths, and potential values that should be explored in order to determine the most optimal exit strategy. We often find that what the business owner wants to do is in fact not compatible with the actual situation.

Know Your Options

An exit strategy is not the same as the sale of a business. Since there are a number of potential methods for exiting a business, it all begins with knowing the options available to you. Regardless of the path you take, you will want to free yourself from the business but also protect your valued employees as well as your business and personal wealth.

Owners can establish the strategy that best meets their goals and protects their wealth once they follow the steps needed to determine the course they should set with their planning. Let's look at how you can protect your wealth by understanding the exit planning process in order to build and execute a customized exit strategy plan.

Establish Exit Goals--Measure Your Financial and Mental Readiness

Are you financially prepared for an exit from your business? If your personal wealth outside the business is not enough to take care of you in retirement, how can you retire? This is called the "Value Gap." This situation is fairly common and leads to developing a plan to "monetize" your business value for your own financial security. The sooner you identify your value gap, the easier it will be to find and execute solutions to plugging the value gap.

Are you mentally prepared for an exit from your business? Being mentally prepared to leave your business may be the largest challenge that you face. If you are not mentally ready today to depart, it does not mean you should put off planning for your exit--in fact, just the opposite is...