Exit Planning
How Will You Transform a Controlling Interest Into a Comfortable Lifestyle?
Problems
Failure to prepare for an exit from a business ranges from practical to emotional. Without planning, crucial decisions regarding the future of a business could be decided by inexperienced relatives, creditors, or court system. The IRS can become a devastating creditor at a very inopportune moment.
Passionate and hard-working are terms describing successful business owners. It is not likely a business owner wants someone else deciding the future for the business. The eventual transition of a business is a certainty–whether the goal includes managing the business “forever” or selling the business.
Three events likely to trigger a transition include retirement, death, or permanent disability. With each event there are two choices: keep the business or sell the business to an outsider/insider. Decisions made today are not permanent. Because circumstances change, prior decisions should be revisited during reviews.
Solutions
Critical areas should be explored. Each consideration triggers a need to address specific areas. Smith, Frank & Partners prioritizes key areas for consideration in an effort to protect a client’s investment of time, mental energy and money.
Exit Planning
- Set exit objectives (income needed)
- Determine value/price (valuation)
- Preserve, protect and promote value
- Convert business value to cash
- Sell business for a note
- Contingency plan for business
- Wealth preservation planning
Converting a controlling interest to cash requires a dedicated team of advisors knowledgeable in the specific markets and the auction process to obtain best offers. Prior planning is key to helping to maximize proceeds. Opportunities to minimize erosion from taxes exist prior to implementation of a formal letter of intent (LOI). Once an LOI is signed, market value is set and tax saving strategies areze limited. Exit planning requires a well-thought-out plan in order to attempt to achieve maximum valuation.
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