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There are many reasons why an exit plan is important for a business owner
REBECCA WARREN is a certified financial planner professional and certified senior adviser in Mesa. She can be reached at (480) 357-8380 or by e-mail at Rebecca@ WarrenFinancialServices.com
There are plenty of days when we want to “take that job and shove it.” But what happens when we’re sick of a job we’ve created for ourselves in a business we’ve founded? The idea is to make a plan that allows you to get out before you tire of your company or before you are overwhelmed by personal, industrial or economic factors that force you to sell, transfer or close a company. This is called an exit plan. An exit plan isn’t born in a day. In fact, many financial experts in investment, tax and estate planning disciplines think it’s wise for business owners to come up with an exit plan when they start a company, if possible. If not, within three to five years of the date they’d like to exit. You will need answers to the following questions:
• How many more years do I want to run this business?
• What’s the optimal way to get rid of the business when I’m ready to go? Do I want to sell it, transfer it to family or associates or just close it down?
• What if I got a fantastic offer on the business tomorrow? What would I do?
• If I sold my business, how would I protect myself from a personal and business tax standpoint? • How do I communicate my wishes and ideas to my spouse, kids and other family members with a stake in the business?
• What about my employees, clients and customers? How do I protect them if I die or decide to leave?
• How much money do I want in my life after my business, and what would I do with it?
• What should I do to make my business as valuable as possible?
• How do I plan the tax implications of my actions toward the end?
• If I have investors, how do I make them happy as I leave?
• Are there any specific accomplishments I want this business to make before I leave? An exit plan allows you to not only to change your own employment but to help you change your whole career if you choose. No one has to stay in the same industry — or company — for life, and with an exit plan, you can leave open the possibility for an endpoint that will allow you to travel, do philanthropy or any number of new activities in business or other walks of life. The financial planning aspect of the exit plan will align your monetary needs with your career or post-career needs. Your exit plan can do whatever you want it to. Some entrepreneurs build sabbatical time and other arrangements for study and learning into the time frame leading up to their exit to help them refresh their minds and decide what their next career or vocation will be. The bottom line is that it’s never really too early to start thinking of an exit plan for a business you’veformed. Today, smart entrepreneurs start asking themselves those questions as they’re organizing and forming companies.
