Business Exit Planning: Prepare for the Future
After contributing years of hard work to grow your company, you likely have thought about how your business will continue when you are no longer at the helm. If you don’t have a succession or business exit plan in place, what you have built could be lost or greatly diminished and have a lasting impact on you, your family and your business.
Let’s take a look at some important components of exit planning and why it should be an essential part of your dynamic business strategy.
What is business exit planning?
The process of preparing for an owner to leave their business by transferring ownership to the next generation, selling the business to its employees or merging with another business is known as exit planning. From a planned retirement to an unforeseen transition of power, an exit plan is a must for businesses of every size.
Exit planning can be complex, and your situation may differ significantly from that of other businesses. You’ll want a plan that provides a comprehensive and dynamic wealth building strategy, including estate planning, succession planning and retirement planning. Each aspect deserves careful consideration, and with the assistance of an experienced and knowledgeable wealth advisor, you can receive guidance to help ensure a smooth transition.
Considerations for a plan
Whether you are developing a new plan or reviewing an existing one, it is important to reflect on business continuity to ensure a successful transfer of ownership. A few specific considerations for you and your management team include:
Strategic Business Partners
- Have you engaged your business partners - your CPA, attorney and banker - in conversations regarding your exit plan?
- Have they provided you with any suggestions to protect the value of your business?
Key Stakeholders
- Will key employees stay with the company when you exit?
- If one or more key employees were to leave the company, how likely is it that they would become employed by a competitor?
- Would they take customers, other employees or trade secrets with them?
Insurance
- Is your company adequately insured against losses, such as data breaches, business interruptions due to fires, floods or other disasters, or untimely death?
Knowing the answers and implications to questions like these can help you develop a robust business exit plan that protects what you’ve built from being lost.
Consequences of failing to plan
When the time comes to transfer ownership of your business, having a defined plan in place will act as a safeguard for your company’s future. Delaying to plan, or even failing to plan, can present significant consequences for you, your employees and your business, such as:
- Failure of the business upon death of the owner
- Failure to provide for loved ones
- Family conflicts
- Lack of defined management upon death of the owner
- Lack of sufficient funds/liquidity
- Loss of key employees/partners/customers
- Loss of value in assets/business interests
You’ve worked hard to build your company into the successful business it is today. To maintain its longevity, make sure that you have a thorough, comprehensive exit plan in place and that it is reviewed at least annually to ensure it is still actionable and accurate.
Business exit planning can be challenging, which is why Trustmark is here to help. Our team of accomplished and tenured wealth advisors can assist business owners with creating a strategy for managing, preserving and transferring wealth that is tailored to their specific situation and needs. Contact a Trustmark wealth advisor today to discuss how you and your business can prepare for a smooth transition of leadership while protecting company assets and value.
