What is a Business Exit Strategy?

Few owners realize that the best time to create an exit strategy is at the same time the business is created. The sooner the exit strategy is created, the better the odds of achieving the goals of that plan. Keller Business Brokers provides advice on any of the following steps for the creation of exit strategies. Exit strategy consulting can be done on an hourly fee basis or on a flat-fee basis depending on the situation. Most of the costs can be kept to a minimum since owners can do many parts of the process themselves.

Goals

The first step in creating the strategy is to determine the goals of the owner. It sounds simple enough but most owners never had to put this down on paper. The options available are almost limitless so where do you start?

• Timeframe - when do you want to exit the business?
• To whom do I want to transfer the business - family, employee, or third party? Family and employees may not have cash is that an issue?
• What is the value the owner would like to receive? Income for life? Lump sum of cash?
• What are the tax consequences of various options? Is it better to sell as a C Corporation to take advantage of the special provisions of Section 1202 in the IRS code? Is it more likely that a buyer will want to do an asset purchase and how will that affect my business?
• Is Business Continuation an issue? Pride in creating a business can be a strong motivator to keep the business name alive. To others, the business name is associated with the family and they do not want others using the family name for fear they may hurt the reputation. Keller Business Brokers LLC will help owners work through these issues or we can refer you to resources who can help with each aspect of this process.

The Value of the Business

Determining the value of the business is crucial to determining how to achieve the goals the owner has described. Professionals can provide unbiased opinion of value. Depending on how close you are to the actual exit timeframe, you may want different levels of valuation services:

• "Rule of Thumb" valuation can be calculated by the owner with the help of information provided by Keller Business Brokers LLC at no cost. Keller has reference guides which list hundreds of business types and thousands of quick and easy guides to value them.
• A formal valuation can be provided by a Keller Business Brokers LLC or a third party valuation firm which takes many more factors into consideration and provides the owner with a printed report. This may or may not rise to the level required by SBA and other lending authorities. The cost of these varies from hundreds to a couple of thousand dollars.
• Comprehensive valuations are much more detailed and much thicker documents which costs several thousand dollars. Keller Business Brokers LLC can guide you to reputable firms that specialize in this level of valuation. This is more appropriate when your business value is likely to be in the millions of dollars and the buyer is going to require more justification of the price the owner is asking.

Developing & Writing the Exit Strategy

Don't forget, writing down the tactics that will be used and the paths taken to arrive at the goals is paramount to achieving them. This includes:

• Contingency Planning: What happens if the health of the owner or other unforeseen incidents occur changing the timing of our exit
• Succession Planning: Short term and long-term if the owner or key individuals are incapacitated.
• Key Employee retention: If an employee is very important to you, a potential buyer may view retention or lack of retention of that employee as a deal-buster - how will you avoid that trap prior to and during the transition?

The Actual Selling Process

After an owner has learned what his/her business is worth and when they would like to sell it, Keller Business Brokers LLC is the logical choice to help sell it. We can translate your exit strategy into reality. Please feel free to contact us anytime.