- Author Chris Hadjiyianni
- Year Date 2020
- Location Winnipeg
- Category Business
This white paper contains an overview of The BEI Seven Step Exit Planning Process™. We have white papers describing many of the Process’s elements in detail. Please contact the advisor who gave you this white paper if you’d like additional information about a specific topic.
Owners begin thinking about the Exit Planning Process when two streams of thought begin to converge. The first stream is a feeling that they want to do something besides go to work every day: either they would like to be someplace else—doing something else—or they simply no longer get the same kick out of doing what they are doing.
These second stream is the general awareness of the following:
• They are close to financial independence.
• They are making significant strides toward reaching financial independence.
• They can achieve financial independence today by selling their businesses.
As these two streams converge, an owner’s thoughts flow inevitably toward exiting the business. As these two streams converge for you, will your business be prepared for your departure on your terms? Consider the following fictional account.
Peter Daniels told his advisor that he wanted to leave his food-processing company in five years by selling it for enough cash to maintain a comfortable post-exit lifestyle. A quick review of the company’s financials suggested that with a current annual cash flow of $1 million (before Peter’s salary of $400,000), the company’s estimated value was around $4 million.
When Peter’s advisor suggested that they create and implement a step-by-step process to increase value, minimize taxes, protect existing value from loss, and assure that his two key employees stay with the company after his exit, Peter agreed but did nothing more. Peter neither designed nor implemented an Exit Plan.
Five years later, Daniels Food Processing Inc. was essentially unchanged, but Peter’s frustration had skyrocketed. An economic downturn had significantly affected business cash flow. Peter had reduced over head but had done nothing to increase cash flow.
For example, he had neither created and updated business systems (especially any marketing plan) nor restructured his inadequate and under-motivated management team.
Peter was still at least five years away from his exit.
Exit Planning is more than thinking and talking. It is taking the actions necessary to enable you to reach all of your Exit Objectives. These Objectives include leaving your business when you want, to the successor you choose, for the amount of cash you desire.
Further, Exit Planning takes time. The farther in advance you start planning for your exit, the more options you have and the better the outcome is likely to be.