“You’ve got to be very careful if you don’t know where you’re going, because you might not get there.” — Yogi Berra

It is not always easy to interpret Yogi. In this case, perhaps he is advising you to figure out just where you are headed in your business. As you near the time when you will leave behind the daily worries and stresses of business ownership, have you defined your successful exit? Because many owners haven’t defined a successful exit, they may not know how to get there. Unless you prioritize your exit objectives, you may have too many objectives, they might conflict and you may not make much headway.

The clearest example may be Bill Wilson, a business owner who recently told me that: he wanted to leave his business within three years, be financially secure, (which meant for him to continue his current lifestyle) and transfer the business to key employees. He was ready to leave immediately.

A quick review of Bill’s personal financial statement, however, revealed that most of the income required to maintain his lifestyle would have to come from the business. His business wasn’t large enough to attract a cash buyer. And, since Bill had done no Exit Planning, his employees had no funds with which to purchase his ownership interest. A long term installment note seemed to be the only answer — a risk Bill was unwilling to take.

Contrast this last resort solution with Bill’s objectives — objectives which could have been achieved had he taken the time (well-before he wanted to leave the business) to establish and to prioritize his Exit Objectives.

If, for example, the need for financial security predominates, selling a business to a third party for cash may be the best and quickest exit path.

If, however, attracting a qualified third party is unlikely, more time may be needed to devise and to implement an exit strategy that provides both cash and a transfer to an “insider” (child or employee).

On the other hand, if transferring the business to the persons of your choice is more important than your need for financial security, and your timeline to leave the business draws near, financial security in the form of “up-front” cash must take a backseat.

As you can see, the three primary exit goals listed below must be considered simultaneously. Ask yourself which is your most important exit objective. Rank your answers from 1 (most important) to 3 (least important).

• Financial security: 1 2 3
• Transfer the business to the person of my choice: (key employees, co-owner or child) 1 2 3
• Leave the business when I want: (immediately or never) 1 2 3

Prioritizing your objectives will help you with your overall path. For example, if you want out soon with cash, but your business cannot be sold today, do you wait until market conditions improve or sell now to your employees? While prioritizing your objectives is not easy, it can make decisions like this much clearer.

One final word of advice: Solicit the input of your Advisor Team as you work through these decisions. It is a good idea to get a fresh set of eyes or an experienced mind to help you to balance these competing objectives.

Contributed by Eric Nielsen, Sunbelt Business Advisors.

Sunbelt Business Advisors offers you unbiased information you need to know about Business Exit Planning.

Tags: business exit plan, business exit strategy, departure objectives, exit your business, leaving your business, successful business exit, succession planning, third party sale, transfer to children, transfer to insiders