Two businesswomen reviewing information on a laptop
Two businesswomen reviewing information on a laptop

Planning ahead for a business exit

Your business succession plan doesn’t need to end up as the next big TV drama. Prepare yourself ahead of time so you don’t end up like the Roy family on the hit series Succession. If you haven’t seen the show yet, it goes a little something like this. With a multi-billion-dollar media empire up for grabs, the Roy children scheme and backstab against each other over the course of the final months of their father’s life. They lose what time they have left with their dad all to one-up each other and seize control of the business. The worst part? This could’ve all been avoided with a documented plan.

Working with an experienced succession professional beforehand is wise. A specialist knows where the exit pitfalls lay and can help you navigate through them in a timely manner. If you’re thinking about selling – even if you haven’t decided when or what you’ll do next – start looking for a succession professional now. They will serve as your guide through the entire process. That includes tackling the following actions well before your exit.

Know the options available

Everyone’s situation is unique. And there are multiple options you will want to consider. Work with your succession professional to sift through the pros and cons of each. Do you plan to sell the business to a family member? Want to stay involved in the business even after you sell? All of these things can affect the exit strategy you choose.

Depending on how far ahead you’re planning, you may even want to have several options available. Maybe your timeframe suddenly needs to move up. Perhaps an heir decides they don’t want to run the business after all. Your exit planner can help you think through and prepare for these potential roadblocks and set you on a path for success.

Understand your company's value

Valuation is more art than science. To find a company’s true value, many variables must be taken into account, not simply the revenue it generates. An experienced succession professional will help you build an accurate picture of what the company is worth. They should consider what you’re trying to accomplish too, as that may affect the sale price. Do you plan to sell to family members? Business partners? You need to put the time and energy in now, well in advance, so the right strategy is in place when it’s time to exit.

Understand your time frame

You don’t need an exact day or month, and it will probably change during the planning process. But having a specific time range tends to put things in perspective. It also helps you decide what to focus on to increase the value of the company. Do you have too few customers? Is inventory too high? What variables can you address now to improve the company’s value when it comes time to sell?

When you understand the challenges and have a set time frame to address them, the exit goes more smoothly and is more likely to end up how you’d like.

Integrate with your wealth plan

Usually a company is a major source of a business owner’s wealth -- but not all of it. That’s why you need to take a holistic approach. An M&A professional won’t proactively advise you on how the sale affects your taxes or your overall portfolio. An experienced succession professional will. You want someone who is familiar with your entire financial situation and can make recommendations in tune with your long-term wealth strategy. Someone who can help you consider the implications for your spouse, children and even your grandchildren.

Think about what's next

You poured your life into building up the enterprise. For many owners, it is part of who they are. Walking away can be difficult. A good business transition specialist will help you think through the next step in your journey so you can get the transition right for all involved and make the next stage in life wonderful – not worrisome.

At First Financial Bank, we know the transition is about more than the money. It’s being confident you made the right succession decision and looking forward to the next phase of your life. That’s why we put the hard questions on the table and have tough discussions when needed. We help you think about the “what if’s,” plan for the unexpected, and put you in the best position for success.