Business Planning is Exit Planning: 10 Essential Aspects

In the dynamic world of business, the journey from inception to maturity is spread through strategic decisions and oversight. One crucial element often overlooked is aligning business planning with exit planning. Integrating these two facets can significantly enhance the company’s value and ensure a seamless transition when it’s time to step away.

There are 10 essential aspects of exit planning that should be integrated into business strategy from the start

1. Assessing Business Value

Regularly evaluating your business's worth is crucial. This involves understanding market conditions, financial health, and competitive positioning. An accurate business valuation is fundamental when considering an exit. It helps set realistic expectations and inform strategic decisions about timing and methods of exit. By continually assessing your business value, you can make informed decisions that align with both your current operations and future exit strategies.

2. Setting Personal and Financial Goals

As a business owner, identify your financial and personal objectives. These goals should guide your business strategies and growth plans. Your exit strategy should align with your personal and financial objectives, whether that means achieving a certain valuation, securing a legacy, or ensuring financial independence.

3. Choosing an Exit Strategy

Identify potential exit strategies early such as selling to a third-party passing the business to a family or an initial public offering (IPO). Each exit strategy has unique implications and requirements. Early strategy selection helps tailor business practices to meet those needs. Knowing your preferred exit strategy influences business decisions and prepares your company for a smooth transition.

4. Improving Business Operations

Optimizing operations should always be the goal in order to boost productivity, cut expenses, and boost profitability. Streamlined operations can greatly increase the value of your company and make it more appealing to potential buyer. Furthermore, enhancements in operations boost daily performance and increase the business's attractiveness as a buyout target. 

5. Planning for Succession

Developing a succession plan ensures leadership continuity and prepares potential successors. A clear succession plan reassures buyers or stakeholders that a business will continue to thrive post-transition. Succession planning ensures business stability and enhances its attractiveness for future exit opportunities.

6. Addressing Tax Implications

Understanding the tax landscape and its impact on your business decisions is crucial. Effective task planning can significantly affect the net proceeds from an exit. Strategies such as asset allocation and timing can minimize tax liabilities. Integrating tax planning into your business strategy ensures that your exit is financially optimized.

7. Managing Legal Considerations

Maintaining compliance with all relevant laws and regulations is essential to avoid legal issues. Legal readiness is crucial for a smooth exit, encompassing contracts, intellectual property rights, and regulatory compliance. Proactive legal management supports both business operations and facilitates a trouble-free exit.

8. Collaborating with Trusted Professionals

Just as buyers have a team to support them, you should too. Whether you are selling your business or liquidating shares, having a team of professionals can help you navigate the process confidently. Key positions to consider include a CFO, CMO, CIO, accountants, corporate lawyers, business brokers, and mergers and acquisitions advisors. These professionals will help you transition from an entrepreneur to an “exitpreneur” making your business attractive to buyers.

9. Estate and Trust Planning

Proper estate and trust planning can help transfer your business assets efficiently while minimizing tax liabilities. Establishing trusts can provide control over the distribution of your assets and protect them from creditors, while gifting strategies and charitable planning can reduce estate tax burdens and support causes you care about.

10. Preparing for Due Diligence

Maintaining thorough and organized records of financials, operations, and compliance is essential. Buyers conduct extensive due diligence before an acquisition. Being well prepared with comprehensive documentation facilitates a smoother and faster transaction. Ongoing diligence readiness supports efficient business management and enhances exit preparedness.

The Importance of Exit Planning

Incorporating exit planning into your business strategy from the outside isn’t just a smart move; it’s essential. By aligning these ten critical aspects of exit planning with your business goals, you set the stage for long-term success and a lucrative exit when the time is right. Remember, the end goal isn’t just to build a great business, but also to ensure that when the time comes to move on, you can do so seamlessly and profitably.

Meet The Author

Eric Matuszak serves as Managing Director for the Private Client Group at Generational cultivating strategic relationships with entrepreneurs and business owners in large enterprises.

Mr. Matuszak works directly with his private middle market clients in the preparation, marketing, and sale of their businesses. He is a trusted leader seeking to always improve his understanding of his clients’ business position and needs, allowing him to bring clarity and calmness to otherwise complex situations.

Prior to joining Generational, Mr. Matuszak developed strategic solutions at Salesforce and Compass Real Estate, where his dedication led to revenue growth of over $1B in new markets. Mr. Matuszak holds an Economics B.A. degree from Texas Tech University. Texas Tech did more for Mr. Matuszak than educate; he is married to his college sweetheart and Mr. and Mrs. Matuszak have a little girl on the way.

For more information, he can be reached at ematuszak@generational.com