Productivity. Profitability. Peace of Mind.

Preparing to Exit – Assembling Your Exit Planning Team

By  Frank Orlando

We’re entering the heart of tax season, and business owners are meeting with their CPAs and accountants to review their taxes and discussing the previous year’s performance.   While this annual ritual of meeting with your accountant is important, there is another regular meeting that should be taking place for every business owner and that is with their Exit Planning Team.

If you’re like most business owners, you probably already have an accountant or CPA firm, and perhaps even a business attorney and or financial advisor.  However, have you ever sat down with all of these professionals and fully articulated your plan for exiting the business?  Do you have a formal written exit plan that you’re actively executing?

According to a 2008 study performed by Whitehorse Advisors, a vast majority of business owners (greater than 9 in 10) agree that having an exit strategy for their business is important for their future as well as the future of their business.  In contrast only 1 in 10 business owners actually have a written, up-to-date exit plan.  Of those business owners without a plan, 80% have given the issue of exit planning little to no attention whatsoever!

I find this last statistic astonishing given that most business owners have a very significant amount of their net worth tied up in their business. Yet have no written and executable plan on how to properly monetize the value they’ve worked so hard to create.  In business school they tell you that you should be planning your exit the day you start your business.  Unfortunately, as the Whitehorse study pointed out, this is rarely the case.  That does not mean that you should not start planning now.  Obviously, the sooner you start planning, the better your chances are of attaining your personal and financial goals.

The way you exit the business and maximize the monetization of the value you’ve created must be carefully planned and discussed together with your trusted advisors – your Exit Planning Team.

The Exit Planning Team

Generally speaking, your Exit Planning Team should include a tax advisor or accounting firm, your financial advisor or wealth manager, your corporate lawyer and an estate planning attorney, and an experienced business intermediary or business broker.  A well crafted and properly communicated exit plan involves the functional expertise of all of these individuals, well in advance of the day or year you plan to exit your business either voluntarily or because of reasons beyond your control.

Tax Accountant/CPA

Regardless of how you exit your business, through a sale, transfer to a family member(s), management buy-out, merger or even IPO, there are tax implications that will affect the transaction.  Many times, tax strategies need to be in place years before the transaction in order for certain transactions to take place and be effective.

Financial Advisor

A good financial advisor regularly meets with their clients to review their investment portfolio.  Many times, the biggest investment a business owner has is the business enterprise itself.  How you plan to use the proceeds of the sale or transfer needs to be properly articulated to the financial advisor, so he/she can properly inform you about how the tax implications of the sale of your business will affect the overall investment portfolio strategy.

M&A Investment Banker / Business Broker

An experienced M&A intermediary can provide you with an objective and unbiased valuation based on market conditions (which are constantly changing) and comparable transaction data.  The valuation serves as a data point, and together with your other advisors you will determine the benchmark valuation and desired after tax proceeds you ultimately want to attain. Another benefit to be gained from involving an M&A professional early is that he/she can make suggestions on improvements you can make to your business to enhance its sale valuation.

Corporate Counsel & Estate Planning Attorney

Besides your company’s lawyer, getting an experienced estate planning attorney involved early in the process is critical to executing a successful exit plan. This is particularly important in situations involving privately-held, family businesses.

Each member of your Exit Planning Team has a functional area of expertise.  The exit plan should be written out, properly communicated with all members of the team (and family members where necessary) and regularly reviewed just like your business plan.  Engage these professionals early and often.

Oak Hill Business Partners is a professional services firm serving small and mid-sized businesses.  Oak Hill provides Growth Management Services, Mergers & Acquisitions Advisory Services, and Bank Management Services.  Our deep experience allows us to work “where strategy meets execution” – our strategy and our execution are based on years of experience doing the work.

Frank Orlando is a Partner of Oak Hill Business Partners, specializing in Mergers & Acquisitions for medium- and small-sized privately-held companies.  His background includes over 15 years of experience in buying, selling and operating companies in several industries including manufacturing, information technology, telecommunications, consumer products, gaming and entertainment.  Frank has also been appointed as a chief restructuring officer (CRO) for several private and publicly held companies.

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