What is the Exit Planning Process?

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It’s a little difficult to describe an exit plan and the process for creating one.  We can begin by saying what it is decidedly not – a fancy written report that sits on a shelf gathering dust.  To have any meaning, an exit plan must be 1) regularly update to reflect changes in your life, goals, finances, the business, etc. and 2) an action oriented plan whose prescriptions are implemented, not theoretical.

The process has four initial steps that take 3-6 months to work through, depending on the size and complexity of the business and estate.  The fifth step continues through retirement:

1. Clearly define your objectives in the following areas: financial, lifestyle, professional, business continuation and legacy/ community
2. Perform a “gap analysis”, a detailed assessment of where the business and owner are today vs. the defined objectives.  Components of this gap analysis will include
1. Projected earnings, net worth and estate value through retirement and after estate taxes
2. Current business valuation, and expected after tax proceeds from a sale under various planning assumptions
3. Improvements required in business to achieve desired sales proceeds
4. Current vs. desired lifestyle (hours worked, ability to travel and take vacation) and professional growth
5. Gaps in current management team and capabilities vs. required
6. Threats to business continuation.
3. Gather input from key stakeholders on actions required to close the gaps, including:
1. Owner/shareholders/partners/members
2. Spouses, children and other family members
3. Wealth advisors/ CPA
4. Attorneys (general, trust and estate, tax)
5. Business consultants and appraisers
6. Key executives (if appropriate)
4. Draft an overall exit plan and related supporting plans
1. Overall financial and retirement plan
2. Exit option prioritization
3. Business value enhancement plan
4. Estate, trust, and tax plan
5. Business continuity plan and agreements
5. Implement plans and periodically (e.g., annually) revisit the first four steps
1. Assess progress vs. objectives and actions plans
2. Refine objectives and gap analysis
3. Update advice from and preferences of stakeholders
4. Update all plans
5. Implement!

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