At a crossroads: Why an exit strategy is important and how to prepare one

Posted on: July 30th, 2019

One of the biggest reasons clients seek out CFO Strategic Partners is because they’re ready to leave their business, whether to start something new, take another position or to retire.

It makes sense. Leaving a business you’ve worked hard to build is a huge proposition, and it comes with plenty of questions.

How much is my business worth? What’s the value of my business outside of my skills and connections? Can I even sell my business?

Because this is uncharted territory for so many CEOs of small and mid-sized businesses, we thought it would be helpful to look closer at business exit planning, from the ground level to specific topics. This is the first blog in our exit planning series, and we hope it will serve as a valuable guide.

The importance of an exit strategy

First things first—why have an exit strategy at all? If you’re reading this, you probably know at least the basics of why you need an exit strategy. It’s worth stating, however, because so many CEOs don’t start to act until it’s too late—and subsequently have to work longer than they’d like or miss out on value from their company.

Too often, CEOs are caught in the day-to-day ups and downs of the business. They do strategic planning, sure, but they’re not looking all the way down the road to the exit ramp. They also might find it hard to think about. As we’ve seen through countless exit strategy consultations and executions with business owners, they simply don’t know where to start. They’ve invested so much time, money and effort into a business that they can’t imagine actually leaving.

But just like planning for your personal financial retirement with a 401(k) or IRA, it’s essential for business owners to start thinking—and acting—early on a business exit strategy.

It takes time to ensure the pieces are in place and find the right direction to maximize the gains from your business.

How to prepare an exit strategy

So, where do you start? We’ll dive into the specific questions you should ask and the steps you need to take later, but for now, these points should give you a good overview on developing an exit plan.

  • Take an honest, unbiased look at your business

Before you can decide the best way to leave your company, you need to see where your business stands. Is your company in a place financially for you to leave? Who would take over? How much is your business actually worth? Once you’re out of the picture, is there enough value in the company for success? These are just a few things you must consider on your path toward exiting the business.

  • Decide which type of exit strategy is right for you

This is the big question—with potentially big monetary ramifications. We’ll discuss this topic in-depth later in this series, but for now, we’ll lay out a few of the options. First, you could pass the business to the next generation, or to another employee, with an employee stock ownership plan (ESOP). You could also pursue partial liquidity or recapitalization, or you could try to find a buyer for 100 percent of the business. It’s really about your desired outcome from this move. While we can’t decide which exit strategy is right for you, our team can walk you through all options, help you find the best fit, and help you execute from there.

  • Plan a timeline

Exit planning and execution takes time. Rather than wait until you’re ready to leave, you should begin thinking about it as soon as possible. As you know, it’s best not to leave things to chance in the business world. By having a plan in place now, you’re taking away uncertainty for the future. An added bonus? The longer you have to look, the more you understand what opportunities are available, meaning more money in your pocket.

We know thinking about leaving your company can be a huge stressor, but with proper advising, it’s manageable. 

At CFO Strategic Partners, we don’t just specialize in growing companies—we help you get the most out of your business, so you can accomplish your goals.  

Ready to start the process? Give us a call at 407-426-8288 or email shannon@cfosp.com.

Tags: , , , , , , , , , ,