What is an Exit Plan?

Short Answer: YES!

Exit Plan: Planning for when you the business owner might want to leave your business, how long you want to continue working in your business, and who might take your business over.

The process of Exit Planning is to help grow your business, stray from problems, limit risks, and make your business more profitable while you own it. By increasing your business’s profitability while you own it is more likely to yield you a higher sale price when you are finally ready to exit. The best time to exit plan is when you still have many years until you want to depart your company.

Here is an excellent interview/article from the Harvard Business Review with Ray Dalio, the Founder of Bridgewater Associates on Leadership Transitions titled: “Why the Best CEOs Are Already Thinking About Their Exits.”

One very significant step in exit planning is to retain your key employees, and you can do this by creating a program. Your key employees play a vital role in increasing your business’s profitability. A profitable business, coupled with a great management team, is more attractive and more valuable to a third-party buyer.

If you are considering selling your business to your employees, see our article: “Should you Sell Your Business To a Key Employee or a Group of Key Employees?” If your employees are ready for ownership you the owner will know this because they have demonstrated their actions already. When selling to your employees, incentivize them with individual incentive plans like deferred bonus plans, phantom stock plans, stock appreciation rights, or even the chance to acquire ownership. By allowing employee ownership, you are sharing the sales proceeds with the employees who are also an owner.

Proper exit planning can help you reduce risk, including problems that arise when a co-owner or key employee becomes disabled or dies, or if something happens to you. Be sure to continually review your Exit Plan at least once a year and make the necessary amendments if needed.

Limiting your risks while increasing the value of your company starts by answering some fundamental questions:

- How long might it be before you want to slow down, or leave the business entirely?

- How much money will you need at the time to be financially secure?

- How much is your business worth now, in cash?

- How can you make your business even more profitable while you still own it and more valuable when you are ready to leave it?

- How much money will your family need if you become disabled or die prematurely?

- Who might be a potential buyer – employees or a third-party? Or do you want to leave the business to your family?

See our articles on potential buyers:

Should You Sell Your Business To a Third Party?

Should You Transfer Your Business To a Family Member?

Should you Sell Your Business To a Key Employee or a Group of Key Employees?

To make any business a success, it takes a team of qualified advisors. MB Law can help spearhead the team and work together with you and your other advisors to help you realize and achieve your goals. 

If you would like more information on Exit Plan’s or have any questions, please reach out to MB Law at info@mb-law.law.






* This information is for general purposes only and is not intended to constitute any specific legal advice of any type.