Exit Planning is a relatively new and developing area of expertise, growing in response to the large number of business owners who are now approaching retirement age and looking for assistance in exiting their companies. It is estimated that 60% of small and medium businesses in Canada are owned by baby boomers, many of whom will be expecting to retire over the next 10 years. In doing so, they must decide on the best strategy to transition their ownership. A common strategy is to pass the business on to one or more family members who have been active in the business and have the interest and ability to be the next owner(s). In some cases the best option will be to sell to an employee or group of employees. Selling to a third party, directly or through a business broker, can sometimes be the preferred course of action. On some occasions, it might be best to simply wind up the company by selling the assets.
The stark reality is that the vast majority of business owners have not started planning for their eventual exit, leaving themselves without a clear strategy, and open to various business and financial risks and uncertainty. They will likely go through this experience only once in their lifetime, and so it can be a daunting prospect to consider, a source of much stress, and a major distraction to their need to focus on running the business. But procrastination is not the answer. The wave of owners trying to sell their businesses over the next ten years will create a buyers’ market. In the ensuing competition, those that have acted early to develop an exit strategy will be the winners.
The “Baby Boomer” demographic phenomenon has been on the horizon for years and many in the business services industry have been preparing to assist their clients with the transition. Law firms, accounting firms, business brokers, personal financial advisors and banks, for example, are among those tailoring their traditional offerings and building capacity in order to play a role in assisting their clients. Each of these professions and service providers can have a specific role to play in an exit planning process, depending on the unique requirements of the business and owner. But no one expert will have all the answers.
So what is it that Professional Exit Planning Advisors bring to this equation that the others do not? What’s been missing? First and foremost, Exit Planners guide business owners through the entire exit planning process, from clarifying their personal and business goals, to assessing/preparing the readiness of the business for the transition, and structuring the exit. Acting as a “quarterback” Exit Planners coordinate the contributions of other experts and professionals, as and when needed. The Exit Planner ensures this virtual team of experts stays on target with the owner’s objectives, and that their efforts complement each other.
In this way Exit Planners bring simplicity and structure to an otherwise complex process. They mitigate risk and stress for owners and enable them to stay focused on running the business during the transition phase.
Ian MacFadden is co-founder and Partner of exitRITE Planning Services. His column appears the first Friday of each month. You can reach Ian at [email protected] or go to www.exitrite.com
