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Business Exit Planning
Business Exit Planning
Business Exit Planning
One day, the business you've built will be transitioned to new owners. Do you have a plan?
Exit planning is a critical aspect of any business, regardless of size or industry. The exit planning industry is a rapidly growing field that helps business owners prepare for the sale or transfer of their business to ensure that they receive the maximum value for their hard work and investment.
At Bolton Advisory Group, we help you prepare your business for a successful transition, whether it’s through a sale, a merger, or a transfer to a family member or key employee. It’s important to start planning well in advance, ideally several years before you plan to exit, to ensure that your business is in the best position possible to maximize value and minimize taxes. By working with an experienced exit planning advisor, you can develop a customized plan that takes into account your unique business, financial, and personal goals. Together, we can identify potential buyers, optimize your business’s value, and develop a strategy for a smooth transition that will protect your legacy and secure your financial future.
Our core belief is that a Successful exit begins with balancing Three Legs of the Stool
- Maximize Transferrable Business Value
- Ensure the Owner is Financially Prepared
- Ensure there is a plan for “What Next?”
Understanding Your Why – Personal and Financial Goals
A Key Part of the Process Involves:
Foundational Goals
Financial security or financial independence, and not looking to your business for financial security
Universal Goals
Level of income post exit/departure date & successor. Exiting your business on your own terms
Value-Based Goals
Non monetary and less tangible
Your Legacy
Then We Look at Your Gaps
The Wealth Gap in exit planning is a critical factor in determining your financial future. It involves calculating the amount you need at retirement and subtracting the current value of your assets, including the value of your business. This gap can be significant, especially if you are heavily reliant on the value of your business to fund your retirement. It is important to note that your business is considered an illiquid asset, meaning it may not have a concrete value on the open market. This can make it difficult to convert your business into cash, which can impact your ability to fund your retirement.
However, it is important to consider what you truly need to live the life you desire, as well as what you want, in determining the best way to use your business as an asset. Depending on your goals, you may choose to sell your business, pass it down to a family member, or convert it into cash in another way. Whatever you choose, it is important to plan for the Wealth Gap and understand the role that your business plays in your overall financial picture. This can help you make informed decisions and ensure a secure financial future.
Wealth Gap = Amount Needed for Comfortable Retirement - Business Valuation
We Also Conduct Personal Assessments to Determine an Owner's Financial Status
What are the different exit options?
We Consider Exit Options for Business Owners
Each option has its own set of pros and cons, and the best choice will depend on the specific circumstances of the business, the owner’s goals, and their personal preferences. It’s important to work with a professional such as an exit planner to consider all options and create an exit plan that aligns with the owner’s goals.
Example of What Can Go Wrong
John owns a manufacturing business and advertises it as a great business with a turnover of $2,000,000 annually, with reasonable profitability and lots of potential. This looks good on paper and a potential buyer gives him a call. He sounds very interested. He comes to John’s premises and asks for some sales and management reports.
These sales reports don’t seem to add up to $2,000,000. John explains it is very complex and there is a difference between the management and accounting reports. The potential buyer asks for sales by product. Once again, John’s reports do not add up. John tries to explain the differences but each time he pulls up a different report he gets different variances. The buyer then asks for the last three years’ tax returns. It takes John a week to track these down as his accountant is away. John also can’t give him last year’s return as it has not been done, even though the financial year finished seven months ago.
The tax return shows a loss. John explains this was done on purpose and he is taking lots of extra payments out of the business but has no documentation. All the official numbers in the tax return vary from numbers placed in the advertisement and those mentioned in their conversations. Finally, the potential buyer asks to see the marketing systems and the policies and procedures – none of which exist and no employee seems competent enough to run the business in John’s absence. At this stage, John has lost the buyer’s trust and all credibility. His constant delays result in the hot buyer making the decision to go with an alternative business for sale.
THE OUTCOME: John probably will not sell the business and if he does, it will be for a discounted price.
If a buyer approached you tomorrow with an incredible offer, would you be prepared?
How much is your business like John’s?
What can you do to improve? aspects in their lives: their businesses, their legacies, their families, and their destinies.
Examples of What Can Go Right
SUCCESS STORIES
“Selling my business was a dream come true. I was able to secure a sale for double the amount I initially thought was possible just three years prior. The buyers were practically lining up at my door, and within four short weeks, the deal was done. I have to give a shoutout to my exit planning advisor, who played a huge role in making this process so seamless. Their expertise and guidance allowed me to get the best possible outcome from my business sale and set me up for a secure financial future.”
“I’m living the dream, y’all! After selling my business, I’ve got more than enough coin to live a totally sick retirement lifestyle. I’m feeling good, feeling myself, and ready for round two with a re-invention. Talk about perfect timing!
And let’s not forget the real MVPs here: my advisors. They helped me every step of the way and made sure I was set up for success. Without their expert guidance, who knows where I’d be right now. Shoutout to the squad!”
“When we sold our business, we made sure to do it in a way that reduced taxes. Our careful planning before the sale also helped us get more money.
I am thankful for the help from our advisors. They made sure we knew what we wanted, helped us figure out what we needed, and made the sale process a lot easier. Their help was important in making sure we had a successful exit.
It’s important to have a plan when selling a business to make sure everything goes smoothly.”