Exit Planning – The task you shouldn’t put off until tomorrow!
Posted by Tom Gledhill on Fri, Mar 04, 2011 @ 09:03 AM
When should a business owner think about Exit Planning? Some people would say “concurrently with starting the business”. Most people don’t go to that extreme. The truth is that most people don’t think about it at all until it’s too late. Why is that? They’re too busy growing the company. They’re too busy putting out fires.
Actually, a business owner should always be prepared for an exit. The Dreadful D’s (Death, Disability, Divorce, Debt) can sneak up very quickly. But there are also owners who know that they will exit in the next few years and they still do nothing to prepare for it. Even residential real estate sellers do some painting, landscaping, and general fix-up work. That can easily be done in a couple of months.
A business is much more complicated and it may take a year or more to round it into shape. A few obvious things that can be done:
• Reduce expenses.
• Don’t make any major capital expenditures.
• Update your contracts with suppliers, customers and key employees.
• Pay your taxes – at least in the last year don’t run all those non-business expenses through the company in order to minimize your taxes. Remember that value is usually a multiple of cash flow and the increase in value is far greater than any tax saving.
To assist business owners in the Exit Planning process, we have developed an “Exit Strategy Toolkit”. To download the Toolkit click here.