Monday , December 17, 2018

WHY EXIT PLANNING NOW? How To Best Plan In A Buyer’s Market

Today, more and more of the 10,000 aby boomers—those born from 1946 to 1964—reaching retirement age are exiting their businesses and listing their companies in the business-for-sale marketplace. The number of small businesses listed for sale nationwide is at a six-year high according to data compiled by, and analysts expect that number to reach unprecedented levels.

The vast majority of these owners will be looking to exit their businesses through a sale to outsiders (a third party) or a sale or transfer to insiders (co-owners, key employees or family members). This movement is predicted to soon result in a glut of companies for sale, driving down valuation and creating a buyer’s market.16.01-02_Legal_Shumaker_image_S

In over 25 years of assisting closely-held businesses and their owners in the exit planning area, I have never seen more business owners who are beginning to understand how critically important it is for them to create a successful exit plan in order to reach their personal and financial objectives by maximizing the value of their business upon their exit.

Let’s assume you are currently a 65-year-old founder and sole owner of a successful business. You have worked hard all of your life but are experiencing the first signs of losing some of the “fire in your belly” for driving your business’ continued growth and would like to soon be able to take some “chips off the table” and create a liquidity event which will allow you and your spouse to travel and do all of the other things you have always talked about while you are still young and healthy.

As you understand it, your business will probably sell for at least $8 million which constitutes approximately 80 percent of your personal net worth.

You would like to retire in the next three to five years and realize you can’t do your exit plan alone. However, you’re wondering who, exactly, are the professional advisors that have the qualities, expertise, experience, and training to help you plan in order to make your transition successful?

My experience has been that the most successful exits have occurred when the business owner has assembled an advisor team, usually including at a minimum a CPA, attorney, financial planner, and insurance professional, to help him/her create and orchestrate a successful exit.

Why an advisor team? Why not just one advisor who can assist in creating an exit plan?

The answer is simple: No single profession or professional possesses all of the necessary skills, expertise and experience to single-handedly lead an owner through all steps of the ownership-transition process. Also, some professionals are not comfortable cooperating closely with professionals from other disciplines for the benefit of their common clients. As a result, the process can stall before it really gets started.

Your current advisors, whether CPAs, attorneys, financial or insurance professionals, may or may not be familiar with some of the important issues which you should address in any well-designed exit planning process.

Instead, they may be more focused on compliance-type activities (general business matters, contracts, employee matters, tax returns, financial statements, etc.), which simply are not planning-oriented. In addition, financial and insurance professionals often focus on a subset of overall planning—investment planning or life-insurance planning—in order to help meet income needs or estate-tax costs.

Having said that, there are of course many advisors who are exceptions to these generalizations. You should certainly discuss these issues first with your current advisors as they may be well-qualified to help you accomplish your exit planning objectives.

At least one member of your advisor team should be trained and possess the knowledge to act as a facilitator of your exit planning process. This facilitator should use a written, detailed and systematic process which covers all the important issues which need to be addressed for a particular owner’s exit.

This facilitator must also be able to work with you and your advisors to create and agree upon a written exit plan and action item checklist for you and for each member of your advisor team. This will shorten the process and reduce considerably the time you should have to spend creating the plan.

A written exit plan is based upon your goals and objectives so it provides a road map that can be understood and followed by you and all members of your advisor team. In most cases, once you have chosen your facilitator, many (or all) of your other current advisors will likely be suitable members of your advisor team, unless they tell you otherwise.

Now that the stage has been set, our next installment will discuss in detail the eight prerequisites for creating and implementing a successful exit plan.

Content contributed Shumaker, Loop & Kendrick, LLP, a full service law firm founded in 1925 with more than 240 attorneys practicing in Charlotte, North Carolina; Columbus, Ohio; Sarasota, Florida; Tampa, Florida; and Toledo, Ohio. Content written by Robert Norris, Partner and co-chair of the firm’s Emerging and Middle-Market Practice Group. For more information, contact him at 704-945-2926 or or visit


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