We understand that business owners are so busy addressing today’s economic challenges, they can overlook the critical task of exit planning.
We also understand that, at some point, all owners exit their businesses. When that day arrives, owners want to exit on their terms, the most important of which are financial independence and choosing the person or entity that will receive or buy the business.
Designing a comprehensive exit plan – both based on your exit objectives, as well as flexible enough to adapt to changing economic, business and personal circumstances - can be the difference between liquidating your company and selling or transferring it for millions of dollars.
Let’s look at the characteristics of a good exit plan in light of a sad but common story of two hypothetical business owners who failed to plan.
Several years ago, Doug, an exit planning advisor, met with Jim and Tim McCoy, owners of a thriving construction company.
What Doug assumed would be a business-planning meeting turned into a “we-are-getting-out-of-business-so-how-do-we-do-it” meeting. As successful as they were, the McCoys were tired of navigating the labyrinth of government regulation and paying ever-increasing taxes.
Ultimately, the day-to-day grind of running a multimillion-dollar company had taken its toll.
For the McCoys, a sale to a third party was not feasible, not only because neither brother was willing to remain with the company after the sale but also because they had failed to develop a strong management team. Few savvy buyers will purchase a company without a great management team committed to remaining after the sale.
Transferring ownership to one or more key employees also was out of the question. None had been groomed to assume ownership responsibilities, nor had the McCoys taken action to fund this type of buyout.
Transferring the company to their children was impossible, because both owners’ children were too young to be active in the business.
The McCoys’ only exit option was to liquidate because their highly profitable company had little worth beyond the value of its tangible assets. After the liquidation sale, dozens of employees lost their jobs, and Jim and Tim left millions of dollars on the table.
How can you avoid the McCoys’ fate?
Johanna Cano - Apr 2, 2020
Cece Nunn - Apr 1, 2020
Vicky Janowski - Mar 31, 2020
Jenny Callison - Apr 2, 2020
Jessica Maurer - Apr 1, 2020
Heather McWhorter, regional center director for the UNCW Small Business Technology & Development Center, shares her top tech and info picks....
Wouldn’t it be nice if, after finally running that 5K you have been preparing for many months, you not only get the reward of accomplishment...
Lee Kent looked out from his Leland storefront. From that vantage point, he saw seemingly endless quick-serve restaurant options, and the ad...