tive word in their minds,” Snider says,
addressing the sensitivity of the subject.
But what business owners—and that
means you!—must recognize is that the
real mission of an exit strategy is to realize
the value of your hard work and time, says
Frank Fantozzi, president, Planned Financial Services.
“Everyone looks at an exit strategy as
something way out in the future, and
they think, ‘I’m not planning on going
anywhere,’” Fantozzi says. “I try to counsel
my clients, ‘Listen, it’s about realizing your
value. Your business might be worth $1
million, but if you’ve done nothing [to
protect your investment], you could lose
that $1 million in a blink. How does that
make you feel?’”
Exit planning is all about addressing risk
and creating a strategy for ensuring that
the value you worked tirelessly to create in
your business can be preserved and enjoyed
by you, your family and other stakehold-
ers. And that business value could be all
you’ve got. Snider says typically owners
have 80 to 90 percent of their wealth tied
up in the business. Your business, in a way,
is your 401(k). “Imagine if you worked for
30 years saving up money in that 401(k)
and then couldn’t access the money when
the time came to [exit],” he says.
How are you protecting your most
valuable asset? Regardless of whether you
started the business this year or a relative
founded the company generations ago, it’s
never too soon to begin thinking about
what’s next after you leave the business,
willingly or otherwise.
“The sooner you plan and protect your
business and family, the better,” says Kay
Au Werter, a financial adviser with Edward
Jones. “Planning today helps protect you
from the unexpected occurrences that can
happen in the future.”
Build an Exit Team
You can’t do this alone. An exit plan involves a multidisciplinary team who works
together to help you create a plan that will
address personal, business, legal, financial,
tax and estate issues associated with exiting
the business. And remember, exit doesn’t
necessarily mean retire. So assemble this
team as soon as possible and begin engaging its members so you can work together
on this process, Snider says.
At the very least, your team should
include an exit planner, a financial adviser
who can address estate planning, a tax
attorney, an accountant and an insurance
professional.
“This team will provide you with advice
and work better with you to get your plans
in order,” says Snider, noting that it is often
beneficial to form a family business council
with the help of an exit planner who can
serve as an unbiased, third-party facilitator.
No single professional has the expertise
to address every aspect of the exit plan (see
Six Solid Pieces to Your Plan on page 16).
By drafting a team to help you with this
process, you’ll better ensure that you do
not leave money on the table come time
to exit the business. Plus, you need outside
perspective because as an owner, you live
and breathe the business.
And while you’re in the team-building
process, be sure to set aside adequate time
to work through an exit plan. Snider says
on average, the process from valuation to
Ways to Exit
Essentially, there are four
ways to exit a business.
Transfer ownership to family.
Sell the business to an
employee or manager.
Sell the business to an outsider.
Liquidate the business
(usually a last resort).
Source: Aspire Management
completely “getting out” of the business
can take seven years. “Selling a business
can take up to a year, or longer, and if you
want to drive value to prepare yourself per-
sonally and financially before the sale, you
can spend a couple of years doing that,”
he says. “Oftentimes in small markets, and
especially in today’s environment, owners
have to finance part of the deal [if selling
the business]. Those terms can go four or
five years. So, it could be seven years before
you are really done.”
Of course, life happens, and time isn’t
always a luxury afforded to an owner who
must exit under duress. (That’s why you
must create a contingency plan—read on.)
But Snider says you can take this exit plan-
ning process and break it down into a more
palatable time commitment. He relates
it to golf: If you play a couple of rounds
each week, give up a game per month and
dedicate that four to six hours to planning
your exit. “You’ll be amazed at how much
progress you can make,” he says, suggest-
ing that owners consider this: “Is the value
of your business and your responsibilities
to family, employees and customers worth
four to six hours a month?” Sure it is.
