Entrepreneurs extensively plan for building a new business. However, quite often, little to no effort is put into the planning of one’s exit from a business.
Many entrepreneurs don’t start planning until it is too late, resulting in the failure to achieve both personal and business goals. Failure to prepare a thorough exit plan may even lead to an inability to sustain one’s lifestyle after the exit, or may negatively affect the company’s performance.
It is therefore of utmost importance to plan your exit strategy years before your planned date to leave.
What is Exit Planning?
Exit planning is the process of strategizing the exit of a privately held company. Exit planning covers the business owner’s goals and objectives in terms of company value, employees and market position, as well as personal aspects such as family and the community.
These factors are then combined to identify an action plan that will help the entrepreneur to achieve his or her goals, in business and in personal life, through exiting a business.
Why Do You Need an Exit Strategy?
Exit planning is not limited to business owners who are ready to step down and retire. It is recommended to have an exit strategy in place years before your planned date of exit to maximize the possibility of attaining all your goals.
These are some of the most common reasons that lead entrepreneurs and business owners to set up an exit planning strategy.
- New Beginnings
Once an established business is up and running routinely, many entrepreneurs choose to leave their position as head of the company to start a new business.
- Planning for disaster
Natural, social, and financial disasters can significantly impact business operations and may lead your business to shut down or to change in ownership.
- Ensure tax compliant
In order to leverage opportunities, a business owner should start planning its exit strategy years in advance to leverage tax reduction opportunities.
- Optimize cash flow
Similar to leveraging tax opportunities, a business owner can maximize cash flow post-exit by careful and timely exit planning.
FREE Download: IT Exit Strategy in 10 Steps
Our 10 step checklist provides you with valuable step-by-step guidance from preparing tax and financial information to key relationships and contracts.