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12 Exit Planning Considerations for Private Company Business Owners

Mark G. Metzler, CPA, CGMA, CEPA
Mark G. Metzler, CPA, CGMA, CEPA Director, Audit & Accounting

Exit planning is a crucial process for private company business owners who are looking to transition out of their businesses. It involves developing a comprehensive strategy to maximize the value of the business and ensure a smooth transition for the owner.

Here are twelve key considerations for exit planning:

  1. Start early: Exit planning is not a last-minute task. It requires careful preparation and implementation over an extended period. Ideally, start planning several years in advance to allow time for value enhancement and addressing any potential issues.
  2. Define your goals: Determine your personal and financial goals for the exit. Do you want to maximize your financial return? Are you looking for a successor who will continue your legacy? Clarifying your goals will guide your exit strategy.
  3. Assess business value: Conduct a thorough valuation of your business to understand its worth in the current market. This assessment will help you set realistic expectations and identify areas where you can enhance value before the exit.
  4. Build a strong management team: Developing a capable and independent management team is crucial for a smooth transition. Identify and groom potential successors who can lead the business effectively in your absence.
  5. Diversify revenue streams: Reduce economic dependency on a single customer, supplier, or market segment to make the business more attractive to potential buyers. Diversification can help mitigate risks and increase the value of your business.
  6. Optimize financial performance and operations: Improve profitability, streamline operations, and enhance financial reporting. Potential buyers will scrutinize these aspects, so ensure your financials are accurate and well-documented. Buyers look more favorably at a potential transaction when audited financial statements are available.
  7. Consider tax implications: Consult your tax professionals to understand the tax consequences of various exit strategies. The structure of the sale, whether as an asset sale or a stock sale, can have different tax consequences. Minimize both federal and state tax liabilities and explore tax-efficient options.
  8. Identify potential buyers: Determine the most suitable buyer for your business. It may be a competitor, a strategic investor, a private equity firm, or even a family member or employee. Research potential buyers and engage in discreet discussions, if necessary.
  9. Prepare documentation: Compile and organize all necessary legal and financial documents, including contracts, licenses, financial statements, tax returns, and employee agreements. Having these documents readily available will streamline the due diligence process.
  10. Seek professional assistance: Engage experienced professionals such as business brokers, attorneys, accountants, and financial advisors who specialize in exit planning. Their expertise will guide you through the complexities of the process to ensure a successful exit.
  11. Develop a succession plan: If you intend to transfer the business to a family member or an employee, create a comprehensive succession plan. Clearly define roles, responsibilities, and the transition timeline to ensure a seamless handover.
  12. Communicate with stakeholders: Maintain open and transparent communication with key stakeholders, including employees, customers, suppliers, and partners. This will help manage expectations, minimize surprises, and maintain business continuity during the transition.

Remember, exit planning is a highly personalized and emotional process. Consider working closely with professionals who can tailor the strategy to your specific circumstances and goals. Leverage the expertise of those who have been through the process to ensure a successful exit.

If you would like to discuss your exit planning strategy, please contact Mark Metzler, Director, Audit & Accounting, or any member of our Transition Advisory Services team.

Mark G. Metzler is a Director with Kreischer Miller and a specialist for the Center for Private Company Excellence. Contact him at Email.  

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Mark G. Metzler, CPA, CGMA, CEPA

Mark G. Metzler, CPA, CGMA, CEPA

Director, Audit & Accounting

Employee Benefit Plans Specialist, Owner Operated Private Companies Specialist, Private Equity-Backed Companies Specialist

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