Exit Planning

Exit planning is a critical yet underestimated financial planning task. For most entrepreneurs and business owners, the value of business is at least 50% of the owner’s net worth; in many cases it is up to 80-90% of the total net worth.  Exit planning focus on maximizing enterprise value.

Why exit planning?

  • 2/3 of the US economy consist of small and medium size businesses
  • Up to 80-90% of the owners’ wealth is tied up in the business
  • Most business owners are looking for an exit in the next 5 to 10 years
  • The majority of business owners have no formal transition plan 
  • After retirement, most business owners need financial security and freedom. Without a proper exit, this may affect the owner’s qualify of life and financial security.

Consequences of not being prepared:

  • After a year after selling, most business owners regret their decision
  • Most businesses in the market don’t sell and when they do, the buyer acquires it at a discount
  • Most M&A brokers and professionals believe a business owner’s unrealistic expectations regarding enterprise value represent the biggest hurdle 
  • Only 30% of all family-owned businesses make it to the 2nd generation; 12% survive into the 3rd generation and only 3% make it to the fourth generation and beyond.

What is stopping business owners from exit planning?

  • Misunderstanding
  • Confidentiality and fear
  • Undervalued
  • Confusion

What events force business owners to engage in an unplanned exit ?

  • Death
  • Divorce
  • Disability
  • Distress
  • Disagreement

Exit Planning is about building, harvesting and preserving a business owner’s net worth by maximizing enterprise value and transitioning at the right time. 

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