Entrepreneurs thrive on the challenges of running and growing their business. But in the ongoing battle to build value, it is easy to loose sight of the end game – divesting ownership while retaining as many after-tax dollars as possible and satisfying any personal objectives. A smooth exit requires sound planning years in advance. The way in which an exit is planned can affect much more than just the money value realized from the transaction. It can suggest what the best strategy would be; how to structure the tax liability on the proceeds to minimize liability; anticipate some obstacles that could delay the sale if not dealt with beforehand; and how to retain any ongoing role in it after transition (if desired). How an exit is handled can even affect the future success of the business itself.
benefits of a financial advisor ? There are too many business sales that prove disappointing because the owner wasn’t aware of better exit options or hadn’t foreseen the problems that would arise during the process and so were pushed into leaving under less than optimal circumstances.
If the business involves partners or other stakeholders whose individual plans for exit would impact the business as a whole, then it’s best to get these into alignment as early as possible to avoid any shockwaves when the time finally comes around. If Partner A has in mind to sell the business in five years, but Partner B wants to own and manage it with Partner A for 15 years, there’s a problem looming. A clear understanding of just how long each partner wants to stay in business and what they expect will happen to the business when they leave can avoid a crisis developing around refinancing or buying out the withdrawing partner.
If the time comes when strategy directs that growth requires a business partner and/or outside financing from angel investors, banks or venture capitalists, the due diligence process they will run the business through will involve asking about the owner’s long-term plans regarding the business, and specifically how long they plan to be with it. That will require a thoughtful response – best presented as a structured transition plan.
There are some transition planning portland oregon (selling to a third party, selling to management or employees, passing to heirs and many others) and each has pros and cons both as a strategy and about the cost of implementing it.
Transitioning is a strategy
Transitioning is just as much about strategy as setting up and running a business. An initial plan should be fleshed out early and reconsidered as circumstances, or personal objectives change over time. Being prepared isn’t good advice just for Scouts. If there is a plan already in place, then it’s possible to make the best use of circumstances – exit at a time of your choosing, when the business is doing well, and the market conditions are advantageous. But if that flexibility isn’t needed and the business runs full term then a plan is still essential to getting the best value with the least frustration from its transition.