There are many reasons you may have started your business: independence, financial security, or the pursuit of a dream. But owning a business brings its share of complexity as well. Eventually, every owner leaves their business, and many have not planned for their exit.

Summit has worked with hundreds of business owners and our team has helped design all manner of exit routes. The key is a planning process that integrates the financial needs of the owners with the plan for the business itself. Exit and succession planning is a critical piece of any owner’s financial plan. Our team has developed a customized process to help you understand your options and chart a course toward your desired outcome. Whether you plan to sell your firm, transfer it to key employees, or pass it on to your children, exit planning provides a roadmap for one of the most challenging aspects of business ownership.

While exit planning can feel overwhelming, our 6-Step Process is valuable in formulating a game plan and making progress toward your goals.

Step One – Establishing Owner Objectives

What would you like to achieve with your exit? When? For many owners, it isn’t simply one thing. Often, it is financial security or diversification. It could be a desire to involve children or to reward key employees. Perhaps it’s to achieve the freedom to enter the next chapter of life. Whatever it is for you, it’s important that you spell out your goals.

Step Two – Financial and Mental Readiness

Do you know what it would take to be financially independent outside of your company? A thorough analysis will determine the financial resources necessary to sustain your lifestyle after exit. The results define the value gap between your projected assets and what’s needed to meet your goals. Additionally, you must assess your mental readiness for exit. What will you do after your exit? How do you feel about being identified as someone other than the owner of your firm? The mental game is often more challenging than owners think.

Step Three – Discover Which Type of Owner You Are

Business owners typically fall into four categories based on their financial/mental readiness. Your exit options become clearer once you recognize your owner type and the corresponding transfer methods. Who do you resemble?

• Rich and Ready to Go – Financial readiness is high, and mentally you can’t wait to start life’s next chapter.
• Wealthy But Enjoy Work – You are financially set, but you like working and don’t want to retire.
• Stay and Grow – You are not financially ready and are happy to work to build net worth and company value.
• Get Me Out Now – Your needs require much from the business, but mentally you are headed for the exits.

Step Four – Learn Your Exit Options

If you are like many owners, you know very little about ESOPs, private equity recaps, management buyouts, gifting strategies, or the myriad ways to structure a third-party sale. An education is helpful, even if to merely discard the options that won’t apply. Given your goals and financial needs, the most likely exit paths begin to take shape in this step.

Step Five – Understand the Value of Each Option

It’s not what you make, it’s what you keep! You must run the numbers for each of the applicable exit options. You will learn about the range of values associated with private companies, the impact of taxes and fees on any transaction, and the cash flow results for both you and the business throughout the exit. You’ll want to know this well before executing the plan.

Step Six – Execute Your Strategy – Protect Your Wealth

You’ve chosen your option, made your plan, and now it’s time to execute. Assemble your team, plan for contingencies, and act. You’ll learn how to help protect your wealth from estate taxes and provide for plan completion in the event of an untimely death or disability. This final step provides the written action plan for you and your advisory team to use as the roadmap for making your goals a reality.