Understand & Design Your Exit Planning Options
Live Stream with Eminence M&A Strategies Managing Partner & President, Sarah Goodman, with Eric J. Negron, CEPA®, CEO of Forefront Wealth Partners, from August 2023, where we discussed the importance of designing and understanding the range of exit options.
Below is a link to the full Live stream published on LinkedIn & YouTube, but I wanted to take a few moments to give some quick insights and key takeaways from this episode of the Exit Planning Forum’s regular streaming content.
While our firm primarily assists owners looking to exit their business through a partial or complete sale, various exit strategies exist for business owners. The choice of exit strategy largely depends on the business's type and size, the owner's goals, and, most crucially, the extent of advance planning by the owner.
100% of business owners will eventually exit their business, yet fewer than 10% have a prepared exit plan or are even aware of the available options.
Choose Your Own Adventure
During my elementary school days, I was captivated by the "Choose Your Own Adventure" books. These unique young adult novels were not designed to be read sequentially from page to page. Instead, at the end of a chapter or section, the reader faces a decision point in the storyline, with directions to different pages based on their choices. These books were not only immensely entertaining but also, like a maze with its forks and dead ends, sometimes led you to a page where the only way forward was a single choice or, in some cases, the hero's untimely demise.
I often tell business owners we assist that this journey is theirs to embark upon. My role is to guide them, ensuring that when we reach a pivotal moment in their story requiring a decision, we have as many viable options as possible.
With proper planning and viewing an exit as a progressive process spanning multiple years, owners can work with strategic advisors to plan and prepare for their business's eventual exit on their terms.
Check out our Live conversation on YouTube:
Beyond Selling My Business, What Are Other Exit Options?
While a complete sale is a viable route for owners who have built a business with transferable value—and we are passionate about helping owners achieve a return on what often represents a lifetime of investment and hard work—it's not the only path available. Below are some alternative exit strategies:
Liquidation: Dissolving the business and selling its assets. This can be an effective and, in some cases, tax-advantaged way to exit, allowing owners to reclaim invested capital.
Passing the business to a family member: Ensuring the business remains in the family and continues the legacy.
Selling to management or employees: Employees or management buy out the owner, often with beneficial tax treatments and incentives for the selling owner and the employees. These are through vehicles like an Employee Stock Ownership Plan (ESOP), Management Buy-Out (MBO) or even a Management Buy-In (MBI).
Merging with another business: Combining resources with another company to exit the current business structure while potentially retaining some involvement or equity.
Going public through an IPO: A less common and more complex route, suitable for businesses with significant growth potential.
Taking the business into hibernation: Scaling down operations significantly or pausing them, with the potential to reactivate in the future.
Franchising: For businesses with a replicable business model, franchising can be a way to expand and eventually exit by selling the master franchise.
Licensing: Licensing intellectual property, such as patents, trademarks, or copyrights, can provide ongoing revenue without the owner having to manage daily business operations.
Recapitalization: This involves restructuring the company's debt and equity mixture to cash out some or all of the owner's equity while possibly retaining a stake in the business.
Startup Acquisition: For startups, being acquired by a larger company is a common exit strategy. This is often pursued by businesses with innovative technology, a unique product, or a strong foothold in a niche market.
Each of these exit strategies has its own set of considerations, benefits, drawbacks and the best choice depends on the specific circumstances of the business and the goals of the owner.
If you want to talk about your exit plan and strategy, or need an introduction to a standout financial planner, wealth advisor, or other strategic partner, we’d be delighted to help.
