Time to face reality — Exit planning needs to be on your to-do list now
Exit planning needs a rebrand. Why? Exit planning sounds like something you can get around to, something you have plenty of time to consider.
In fact, our recent survey on exit planning proves that. Only about half of our respondents reported having an exit strategy, and more than half think 5-10 years before planning to leave is a good time to cement one.
A better term for exit planning is exit reality. This reflects the fact that exit planning is not a “should do”—something that can be saved for next year, or five years from now. The reality is exit planning is a must do. Now. In particular, a business continuity plan is critical.
In business, as in life, things can change quickly. Partnerships can become untenable and dissolve. Worse yet, a sole owner can suffer a debilitating illness or even pass away. These are just two situations where exit planning becomes exit reality. We’ve seen this happen.
In one case, a 100 percent owner of a business suddenly and unexpectedly died. Luckily, in this case, the owner had properly planned. Though the transition was still complex, it was certainly made much easier because there was a clear path to ensure the succession of the company and fiduciary duties to the trustees or heirs were handled smoothly. If the owner had not planned, there would have been many more questions. Who will run the business? Who will take over ownership? These are difficult and stressful decisions that would be left for the grieving family to make quickly.
Without facing reality, emergency situations or key executive departures can put the entire business in jeopardy. Proper planning can be the difference between liquidating your business or selling/transferring it for potentially millions of dollars.
We’ve written about this scenario from a CFO point-of-view, and many of the ideas we discussed there are still applicable for you, the business owner.
Can you answer these questions?
- Who is handling the day-to-day operation of the company in the short-term? What about the long-term?
- What are the fiduciary responsibilities of the trustees or heirs?
- Does the financial team have access to company funds?
- What key relationships (banking, investor, etc.) do you hold? Is there anyone on your team who will be able to take these over?
- What internal message will be shared with employees to prevent unrest? What external message is told to important clients and vendors?
If you already have a plan in place, it might be worth revisiting. The exit planning process needs to adapt to changing economic, business and personal circumstances. Exit planning is a process, but as you work on your planning for 2020, it is important to also review the continuity plan. This means making sure your business has a workable plan for any situation.
At CFO Strategic Partners, we specialize in exit planning and have guided hundreds of companies through difficult transitions. It is our duty to serve as your trusted advisors and make the exit planning process easier for you and your company.
Call us at 407-462-8288 or email Shannon@cfosp.com. Let’s start the conversation.