Recently, SCORE presented a workshop designed for business owners on exit planning strategies. They discussed how to identify the causes and circumstances for exiting a business; how to evaluate the impact of exiting a business on employees, family, and clients; and options and issues for exiting a business.
Exiting a business impacts you as a business owner, your family, your clients, and business partners – not just the business itself. Every business should have at the very least – a brief exit plan strategy, which is a necessary component of your regular business plan. If a partnership is involved in the business, the exit strategy should be established and in writing at the start of the partnership. While you can make all the plans you wish, there is enough chaos in the world to have contingency plans prepared for any shift of business, health, personal issues, and disasters. Exit plans will need to be updated periodically during the lifespan of your business. Exit plans are living documents, it’s a good idea to evaluate yours once every year and be open and honest with all business partners throughout the life of the business.
Why exit a business? There could be a number of reasons, however some of the most common include: family issues, death or disability of the business owner or partners, financial insolvency, decline in business, tax issues, the product is no longer viable as a revenue source, or you have achieved all your business goals and wish to sell your business to another company or new owner.
Once you have decided you want to exit your business, it is important to make sure all your obligations are met. It’s also important to finalize all payroll and sales taxes – the government will collect all necessary funds – so meet your obligations!
Here are some other key points to think about when getting ready to exit your business: exit strategy contingency fund, buyer/seller agreements, life insurance, conditions of any partnership agreements, and potentially speaking with a trusted advisor like an accountant or lawyer during the exit process. Do what’s reasonable for your business!
Stay on the lookout for future seminars at First Financial – we offer a business seminar each month! If you have any business banking or loan related questions, contact Business Development.