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7 Steps to a Successful Exit for Business Sellers

08/16/2016  |  By: Andy Lowe, ASA, MAFF, ABAR, Senior Manager, Litigation Support and Valuation Services

There are a lot of reasons to go into business: independence, financial security, the pursuit of a dream. But have you thought about how to eventually get out?

The importance of planning an exit strategy should be unique to you and your business. It should also be a long-term, systematic approach to better business management. If you build your business so that it will ultimately command a higher sales price, you are (de facto) building a more efficient and profitable enterprise in the interim…good now, better later. Finally, a plan also offers you peace of mind that your business is always "in order." If you do not have a strategy, you owe it to yourself, your family and your business. So how do you start?

Seven Steps to a Successful Exit:

  1. Establishing Owner Objectives A winning and ultimately successful strategy rests on three owner-established goals, which are the foundation of your personalized Exit Plan:
    1. When you want to leave
    2. How much money you want when you leave
    3. To Whom you want to leave the business
  2. Establishing Business Value and Cash Flow
    1. Step One establishes what you want or need in order to leave your business in style.
    2. Step Two determines what you have...how much your business is worth? If you are selling to a family member, key employee or co-owner, future cash flow of the business after you leave it (for reasons you will learn) is even more important than value.
  3. Promoting Value - What features, or characteristics, are necessary to make your business saleable and valuable? These features (Value Drivers) either reduce the risk associated with owning the business or enhance the prospects that the business will grow significantly in the future. Find out what they are.
  4. Sale to a Third-Party for Top Dollar - If your goal is to sell to a third-party, learn how to do so for top dollar.
  5. Transfer to Management or Family Members - A sale to insiders does not end with the closing. Only when your price is paid in full does the transfer end. Learn how to orchestrate a successful sale to insiders who often lack sufficient cash.
  6. Developing a Contingency Plan for the Business - Business continuity is much more than making sure there is a new owner. If you die or become disabled before your exit is complete, the dream of financial security for you and your family might be unattainable. Learn how Business Continuity works whether or not you have a Co-owner
  7. Wealth Preservation Planning - The sale of a business generates cash for you, your family and the IRS. Learn how to minimize what percentage of the proceeds you eventually "share" with the IRS.

We would like for you to contact us to learn more about our current opportunities. Please contact Andy Lowe at 865-862-3027. Andy Lowe serves as the head of the Valuation, Litigation & Business Transition Services Group in LBMC’s Knoxville office.