The No-Cost Method to Start Business Exit Planning

In the last issue (#4), we explained Why You Need to Develop a Business Exit Plan – NOW. In this issue we discuss The No-Cost Method to Start Business Exit Planning.

"Through the power of self-education you can be anything you want to be or do anything you want to do. Self-education power does not require money, fixed time or fixed life style. Options are extremely flexible. Rewards are unlimited. You can control your destiny." Bob Webb

The No-Cost Method to Start Business Exit Planning

Although we strongly recommend you ultimately use advisors to participate in the process of writing a formal business exit plan, you can start the process very inexpensively, or at no cost, by educating yourself on multiple facets of the process.

Through self-education and self-accumulation of some information, you can streamline the process and save on the cost of developing your business exit plan.
CAUTION - IF YOU DECIDE TO START THE PROCESS YOURSELF TO SAVE ON FEES, START TODAY AND DEDICATE YOURSELF TO ACCOMPLISHING THE TASKS. IF YOU CAN'T OR WON'T COMMIT THE TIME, DO NOT PROCRASTINATE. INSTEAD, YOU ARE BETTER OFF IMMEDIATELY HAVING PROFESSIONALS START THE PROCESS FOR YOU.

Eight preliminary steps to start the exit planning process without spending much on professional fees.

The 66 obstacles to a successful business sale are not the only reason you should start planning your exit NOW. A strong exit plan will take into account the following considerations:

1. Self-education
  • To achieve self-education, our website, www.HowtoPlanAndSellaBusiness.com, is dedicated to providing information on the business exit planning process. With a time investment of 15-20 hours on our website, you could learn a great deal about the exit planning process as well as the business sale process.
2. Obtain a realistic estimate of the value of your business
  • To plan where you are going, you need to know where you are currently. As a business owner, you need to realistically estimate the current value of your business. In addition, you need to identify the obstacles you face in selling your business. And it would help to know what you can do to improve the value of the business. Many business brokers offer no-charge, no-obligation evaluations of businesses and can provide feedback on the business’ value, as well as the obstacles and opportunities for improvement. If a broker requires a small fee for the work to be performed, it can be worthwhile. (Before you interview business brokers requesting this service, read our special report “Insider Secrets To Selling Your Business – Business Broker Best Practices and Selection Criteria”) Consider interviewing multiple brokers and requesting evaluations from two different brokers, then compare and contrast their evaluations. This is a great way to start the exit planning process and in most instances, can be achieved at no cost.
3. Obtain a realistic estimate of the value of your real estate holdings
  • If you are unsure of the realistic values of your real estate holdings, most residential and commercial real estate agents will provide a comparative market analysis (CMA) at no charge. The CMA report will include their estimate of the fair value of your real estate. Because commercial real estate valuations are more difficult to ascertain, consider obtaining multiple CMAs from multiple agents.
4. Prepare a list of your personal financial assets and liabilities
  • To enable a productive meeting with a personal financial planner to help with retirement planning, prepare a list of your personal financial assets and liabilities. The list should include all assets owned jointly or separately by you and your spouse (if married) and should include copies of the most recent account statements for: all bank accounts, all taxable investment accounts (stocks, bonds, etc.), all retirement investment accounts (401k, IRA, SEP, Keogh, etc.) the estimated value of residential real estate holdings, the estimated value of commercial real estate holdings, the estimated realistic value of the business and other assets such as personal notes receivable, stock options, valuable artwork, vintage automobiles, etc. Your list should also include all personal liabilities for you and your spouse including installment debts, mortgages, credit card debts, notes payable, unpaid taxes, etc.
5. Summarize current and expected future income for you and your spouse
  • In addition to making a list of assets and liabilities before meeting with a personal financial planner, also summarize current and expected future income for you and your spouse. This list should include your business salary, your spouse’s earnings (if any), estimated defined pension benefit plan income and the estimated Social Security income for the two of you. Also make a list of all life insurance policies you have. It’s also helpful to analyze and summarize your monthly (or annual) living expenses.
6. Consider your post-exit interests
  • Determine your post-exit interests, discussing with your spouse or significant other where applicable, and try to develop preliminary but flexible plans. One aspect of exit planning is projecting your future income needs; those are totally dependent on your lifestyle expectations after you leave your business. Even if you are more than ten years from selling your business, have this preliminary discussion. It doesn’t have to be decisive and can be flexible, but it’s very important that the conversation take place.
7. Meet with personal financial planners
  • After accumulating the data in the previous no-cost steps, call a couple of personal financial planners and request a free initial consultation. Utilizing the data you’ve already accumulated, financial advisors …