You, Your Exit Plan and Your Options

When it comes time to enjoy your retirement, you may reach a crossroads in deciding what to do with the business you have built. It is important to take the time to reflect on your goals and timeline in exiting your company, as well as each of your possible options when making such a tremendous, albeit personal, decision.  The four main corners of exit planning are (1) merger, (2) inter-company or inter-familial transition, (3) sale and (4) dissolution. Each corner comes with its own set of peaks and pits and should be looked at carefully to decide what is best for the future of your business.

In a merger, two or more businesses will consolidate to form a single entity in order to strategically grow, change their business model, or even eliminate competition. In thinking about a merger, first assess the strength of your business, your employees, your management, your finances, any intellectual property and more. Ask yourself: Will this produce investment income when I’m retired? Will this merger allow my employees to continue to succeed? Or Is there someone in my current business prepared to lead instead of merging? If this last question is nagging at you, you may be looking at a transition, instead.

In a transition, consider whom you trust to leave your business to – is it your CEO? Someone you have taken under your wing? Your child? Focus on how and why you want this transfer to take place. Do you want to transition gradually -- taking the time to train your protégé -- or do you want to remove yourself sooner than later? If sooner, do you have an action plan to allow the business to continue to see growth? Think about why have you chosen your successor – does this person bring new strengths to the table you think the company could benefit from? Additionally, consider the current business dynamics. Take time to think about how your additional employees will perceive this shift in power if you would like to transition to someone already inside the business.

Mergers and transitions work well when the owner is working with a long-term plan, and is there to oversee the changes to the business and continue to help it succeed (although this is not always the case). However, if you are looking to exit in a timelier fashion, a sale or dissolution may be more in line with your goals.

When thinking about a sale, consider whether you are ready to step away completely. If the answer is yes, begin by getting your financials in order and soliciting a valuation to assess your business’s worth so that you are prepared when taking your company to the negotiation table. Think through whether you have a buyer in mind or whether you need to reach out to a professional service firm to assist you in finding a buyer. Decide on representation that you trust via accountants, attorneys, and corporate finance and other sales professionals. All of these moving parts will set you up to have your best chance of the most lucrative sale. If you feel that your company may not be in the place for a total sale, next, consider a dissolution.

If you are ready to close the doors of your business once and for all, a dissolution may be the best exit plan for you. Ask yourself whether you are ready to say goodbye. Begin by reviewing your company’s articles of organization, incorporation, operating agreement or by-law agreements for the terms required when planning a dissolution. Take an inventory of your current creditors and take the time to get your financials in order before completing any necessary paperwork/notifications based on your state requirements. Much like in a sale, it is important to consult with the same team of expert planners. The professionals will help you achieve your goals while managing legal and stressful topics, as there are very specific state-by-state rules in dissolving your business.

If you feel that you are ready to exit your business, Schneider Downs has a full complement of professionals suited to meet your needs. We have experience in helping clients in each of these areas and would be happy to help you reach your goals. Reach out to us today to get started!

You’ve heard our thoughts… We’d like to hear yours

The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].

Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.

© 2023 Schneider Downs. All rights-reserved. All content on this site is property of Schneider Downs unless otherwise noted and should not be used without written permission.

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