Why Exit Planning Is Essential for Your Closely Held Business
Building your successful business took dedication, sacrifice, and years of hard work. But what happens when you’re ready to step away?
Whether you’re envisioning retirement, pursuing new opportunities, or simply ensuring the longevity of your company, a well-structured exit plan is essential.
Everyone who owns a business will exit that business at some point. For those who do not plan, the statistics are disheartening.
Only one in five businesses actually offered for sale will find a buyer. Business brokers report that they reject 70 to 90 percent of small business owners looking for someone to represent their business.
For those business owners who do plan, the future is much brighter. A well-implemented exit and succession plan greatly increases the value of a closely held business.
Exit planners report that multiples of two times the pre-exit plan value are commonplace, and that in some cases businesses can increase in value by five times.
Every business is different. But one thing is clear: exit planning is the critical element in creating a sellable business. Beyond just finding a buyer, exit planning improves profits today, frees up free time for the owners and mitigates risk.
Our corporate and business law department assists the owners of closely held businesses to position themselves for a smooth and profitable exit.
Jay McDaniel of the Weiner Law Group brings over 30 years of experience as an attorney for closely held businesses, combined with certifications as an exit planner and a valuation analyst.
He provides clients with a combination of legal expertise as well as business financial acumen to guide closely held business owners and their families in achieving a successful transition that preserves their business and personal legacies.
If you require New Jersey business valuation services, get in contact with Weiner Law Group today to schedule a consultation with Jay McDaniel.
Why Exit Planning is Critical for Business Owners
Exit planning is more than just selling your business. It’s a comprehensive process involving a team of trusted advisors that addresses the personal and financial goals of a business owner while ensuring a smooth transition for your company when the time comes.
In fact, many business owners decide not to sell their business after completing an exit plan.
They report having more time for family and outside interests, a stronger, more stable, and profitable company, and that they no longer are tied to the grind of the business to support their lifestyle.
They are secure that when, at some point, they do transition out of the business, they will have assets for the next chapter of their lives, in whatever form that may be.
Exit and succession planning is a fundamental change: from owning a well-paying job to owning a business. There is a world of difference.
What Is Exit Planning?
Exit planning is the strategic process of preparing a business owner for a successful transition. This may involve selling the business to a third party, passing it to the next generation, or transferring it to employees.
The goal is simple: protect the value of your business and ensure a smooth transition without disruption to operations or profitability.
The process takes time and commitment and involves understanding the financial, operational, and personal goals of the business owner.
Legal, tax, and financial professionals work together to align these goals with the available options for exit. The right plan sets clear steps and timelines for each phase of the transition.
Key Considerations in Exit Planning
Exit planning is a complex process. Our team ensures that the owner’s focus is directed to stability and value as necessary for a successful exit plan. The key areas we focus on include:
- Valuation: Accurately determining the value of your business is the critical. We help you obtain and understand d a reliable valuation that accounts for both tangible and intangible assets. The successful exit plan starts with the owner understanding both what the business is worth today and what it could be worth as a “best in class” enterprise in its industry.
- Internal and External Threats to Stabilty: Risk mitigation through our business bulletproofing process protects the owners from the catastrophic circumstances that will affect half of all closely ;held businesses. A thorough review of the business and a commitment to risk mitigation from such events as death, disability, misappropriation of assets and unfair competition ensure that the existing investment in the business is well-protected. Business without risk mitigation are worth much less than.
- Maximizing Business Value: As a result of the valuation process and in-depth evaluation of the business, we to work with the owner to objectively identify the strengths, weaknesses, and opportunities for the business. Key to this process is understanding the “earnings gap,” which is how much the earnings benefit of the business to its owners compares to the leaders in its industry.
- Assembling and Guiding the Team: A successful exit plan involves a team of trusted advisors, including those who presently work with the business and its owners. These include lawyers and accountants, wealth advisors, trust and estates lawyers, appraisers, and insurance professionals. Other advisors may include family business advisors, management consultants, marketing firms, and human resources consultants.
- Tax Planning: Exit strategies have profound tax implications for the owner and the owner’s family. Developing a tax-efficient strategy is critical to achieving the maximum financial benefit from the value of the business.
- Succession Planning: For many owners, a primary concern is how to successfully transfer ownership to family members or key employees. The failure to develop a succession plan that is understood and accepted by the key stakeholders, from children and other family members to employees, is a critical component of a success exit plan. Uncertainty and disagreement are often at the root of disputes that destroy family relationships.
- Implementing the Plan: When the time comes to take the business to market, if that is the decision, we work with owners to evaluate the alternatives and select a strategy and provider for the next stage of the plan. These typically include a strategic sale to a competitor, refinancing through a partial sale to an investor or private equity funds, sales to employees through a tax-favorable Employee Stock Ownership Plan (ESPOP), an inside sale to a key employee, or listing the business with a business broker or merger and acquisition firm. We assure that the company is ready for the due diligence process with well-documented financial and operational records.
How Long Will It Take to Implement an Exit Plan?
Developing and implementing a successful exit plan is a process that requires a commitment of time and resources.
The most successful exit plans are implemented over a period of three to five years. Many exit planners consider that an effective exit plan will require at least a year.
An exit plan involves the development of a long-term plan that is implemented through annual plans and shorter term projects.
We recommend using the Value Acceleration Methodology developed by the Exit Planning Institute, which uses 90-day spints of concentrated effort to implement the components of the plan.
Why Work with Weiner Law Group?
The Weiner Law Group understands that no two businesses are alike. We tailor each exit and succession plan to the unique needs of your business and personal goals.
Our exit planning team is headed by Jay McDaniel, the chair of our business and corporate law department.
Jay has represented the owners of closely held businesses over three decades of practice. He is certified as an exit planner by the Exit Planning Institute and as a valuation analyst by the National Association of Certified Valuators and Analysts.
Through his professional association, Jay has access to thousands of professionals who assist closely held business owners.
Start Planning Your Future
Exit planning is about securing your future. The sooner you start, the more options you’ll have.
Why Choose Jay McDaniel and the Weiner Law Group to assist you with planning for your succession or exit from your closely held business?
We pride ourselves, at the Weiner Law Group, on delivering exceptional legal representation tailored to the needs of our clients.
Jay McDaniel’s practice reflects the firm’s commitment to excellence, combining legal experience with business planning and financial expertise and a results-oriented approach.
Jay’s ability to simplify complex business decisions, his network of professionals and expertise as an exit planner, his attention to detail, and his personal approach to the unique issues confronting his closely held business clients make him a trusted partner in securing your future.
As you address the succession and exit planning issues that inevitably face every business owner, contact Jay McDaniel at the Weiner Law Group.