BET 6-Step Business Exit Planning Process
Business Exit Timing, LLC designs, implements and monitors comprehensive exit plans for successful business owners that understand the importance of leaving their business on their schedule and on their terms.
Our 6-Step Business Exit Planning Process begins with identifying your unique Owner Objectives:
- Your desired departure date
- The value you will need to obtain to be financially independent or to sustain a desired lifestyle throughout your remaining life expectancy
- The individuals or entities to whom you want to sell or transfer your business
Your Owner Objectives drive the design of a customized plan and are matched against your current business and personal assets. The outcome may be a range of suitable options and recommended financial tools for a near-term exit, or plans, strategies and action plans for a delayed exit. Throughout this planning process you will gain clarity with regards to your business’ worth, a profile of optimum buyers or the best structure to accommodate a smooth and efficient internal sale or transition to the next generation. In short, our planning process will help you maximize financial return, minimize tax liabilities, plan for contingencies and increase the probability of a successful exit or transfer of your business.
BET’s 6-Step Business Exit Planning Process
Exiting Your Business is a Process, not an Event,
Success Depends on Planning and Positioning.
- Step 1 / Determine Owner Objectives and Business and Personal Resources»
- Step 2 / Financial Modeling»
- Step 3 / Business Continuity Planning»
- Step 4 / External/Internal Sale»
- Step 5 / Retirement Planning»
- Step 6 / Estate Planning»
Determine Owner Objectives and Business and Personal Resources
The exit planning process begins with identifying and articulating your Owner Based Objectives. Owner Based Objectives are different than operational objectives such as budgeting, marketing, staffing, etc. Owner Based Objectives drive the design, development and implementation of your customized Business Exit Plan thus setting the course for your future and the continuity of your business beyond your leadership. Examples of Owner Based Objectives include:
1. Do you know your exact retirement goals and what it will take — in cash — to reach them?
2. Do you know how much your business is worth today, in cash?
3.Do you know the best way to maximize the income stream generated by your ownership interest?
4.Do you know how to sell your business to a third party and pay the least possible taxes?
5.Do you know how to transfer your business to family members, co-owners, or employees while paying the least possible taxes and enjoying maximum financial security?
6.Do you have a continuity plan for your business if the unexpected happens to you?
7.Does your family have financial security if the unexpected happens to you?
Evaluating business and personal assets is necessary to determine what exit avenues are available to you now or, what must be accomplished to meet your Owner Based Objectives in the future.Powered by Hackadelic Sliding Notes 1.6.5
Selected scenarios for exiting your business are compared and evaluated on the basis of future cash flows, income taxes, retirement income, and wealth retention and distribution objectives. This includes:
o Current and Future Cash Flow Analysis
o Income Tax Analysis and Planning
o Retirement Income Objectives (life style expenses vs. after-tax cash flow)
o Survivor Income Analysis
o Wealth Accumulation
o Wealth Distribution
o Estate Tax Planning
o Monte Carlo Simulation (probability testing)
Business Continuity Planning
This is a critical step in the exit planning process, assuring the stakeholders of the business and the owner’s family that if an unexpected event causes a financial crisis, it will simultaneously trigger a financial solution. As a example,
• What if you can’t work for a month, a year or, for ever?
• What if you die pre-maturely?
• What if your co-owner dies or becomes disabled?
• What if you lose a key employee(s)?
• What if you get divorced?
• What if you get sued?
Proper preparation can drive higher selling-price multiples, favorable funding terms and attract better qualified buyers. This requires an independent business appraisal to ascertain the fair market value of your business given your industry, demographics, local competition and current market conditions.
An internal sale can be succession to the next generation, sale to a co-owner, key employee or group of employees. Often, the purchase must be funded from business cash flow; a fact pattern that triggers a tax dilemma. This step structures the inside sale to mitigate taxes and ensure you receive maximum value for you ownership interest.Powered by Hackadelic Sliding Notes 1.6.5
Your business ownership interest represents 65% to 95% of your net worth. As a result, you will need a liquidity event, one that converts non-liquid business assets into cash to retain your current lifestyle and financial independence throughout retirement.
We compare your after-tax cash flow from all assets, business and personal, and compare it to your desired lifestyle expenses. The gaps are filled with recommended financial tools, such as:
• Tax advantaged qualified retirement planning
• Tax advantaged non-qualified plans
• Captive Insurance Companies
• Pro-active wealth management
• Asset protection from creditors and litigants
• Insurance strategies for building wealth outside your business
You as a business owner represent a unique estate-planning situation because the business often represents a significant portion of your net worth. If you have family members active in the business, it can create an additional layer of complexity.
Common objectives in this step are often related to family income, personal assets and family harmony. As a retiring or departing owner, you may want to maintain or replace the income stream you derive from your business even after you are no longer in an ownership position.
Other objectives in this step could be:
• Preserving personal wealth from tax erosion and liabilities
• The tax efficient transfer of assets during your life, and at death
• Fairly managing expectations of family members who are active in the business