A business exit plan is not a one-time document, but a living strategy that should evolve as your business, financial situation, personal circumstances, tax laws, and market conditions change. Keeping your exit plan current ensures that when the time comes to sell, transfer, or close your business, the transition is smooth, profitable, legally sound, and consistent with your goals & objectives.
Here are several best practices for maintaining your business exit plan so it remains relevant and effective:
- Review and Update Your Exit Strategy Annually:
Businesses grow, markets shift, and personal goals change. Conduct an annual review of your exit plan to ensure it still aligns with your:
- Business valuation and financial situation;
- Market trends and buyer demand;
- Evolving owner and stakeholder expectations;
- Regulatory and tax law changes;
- Advancements in technology; and
- Retirement or succession timeline.
Schedule an annual exit strategy meeting with key stakeholders (partners, advisors, attorneys, accountants, etc.) to assess the need for any necessary updates.
- Keep Your Business Valuation Up to Date:
A business’ value can fluctuate over time based on your revenues, industry conditions, and economic trends. If you haven’t had your business valued in the last 2 years, you might be overestimating or underestimating its worth, which can impact your exit strategy.
- Get a professional valuation every 1 to 2 years;
- Track key performance indicators (KPIs) to gauge business health; and
- Adjust pricing expectations and exit strategies accordingly.
Knowing what your business is worth allows you to be more proactive. For example, if your industry is consolidating, an early exit might be more profitable than waiting too long, or if the value of your business will not give you what you need for retirement, you could hire a consultant to help boost the value of your business.
- Regularly Update Legal and Financial Documents:
Outdated or missing documents can cause delays and legal issues when exiting your business. Business owners should ensure:
- Buy-sell agreements – for partnerships – reflects current ownership terms;
- Operating agreements and contracts are up to date; and
- Succession plan names the correct heirs, managers, or buyers.
Business owners should consult with their attorney to review key business contracts and exit-related documents annually.
- Strengthen Your Business to Attract Buyers:
If your exit strategy is to sell to a strategic buyer, make your business more attractive to potential buyers by:
- Reduce the business’ dependence on the owner by building a capable management team;
- Document the company’s processes and standard operating procedures (SOPs;)
- Meet with a business consultant to identify ways to maximize the value of your business; and
- Clean up financial records for transparency.
Potential buyers will scrutinize profitability trends, client contracts, and operational efficiency, so it behooves a business owner to keep them optimized !
- Align Your Exit Plan with Personal and Financial Goals:
A successful business exit is tied to the business owner’s personal finances and retirement goals. Reassess whether:
- Your exit timeline aligns with personal retirement plans;
- You have enough financial security post-exit,; and
- You are still comfortable with your chosen exit method (e.g., sale, succession, or closure.)
Meet with a financial planner to ensure your exit strategy aligns with your post-business life.
- Stay Aware of Market Conditions and Industry Trends:
In today’s ever-changing marketplace, business valuation, buyer interest, and exit timing requires closer scrutiny:
- Monitor mergers, acquisitions, and competitor exits;
- Stay informed about regulatory changes that impact valuation; and
- Be flexible, sometimes, the best time to exit is earlier than planned.
If industry trends suggest declining demand, consider an earlier exit to maximize value. Your business exit consultant can keep you apprised of the trends that could impact your exit.
- Keep Communication Open with Key Stakeholders:
For family-owned businesses and partnerships, regular communication ensures a smooth transition.
- Discuss expectations with heirs, partners, or potential buyers;
- Address succession concerns before conflicts arise; and
- Provide training for future leaders if you are passing the business down to your heirs.
A lack of planning often leads to family disputes or a “forced sale” – keep everyone informed and prepared to minimize the risk of these problem negatively impacting the business.
In conclusion, a business exit plan should be a dynamic, regularly updated strategy, not something you create and forget. By periodically reviewing financials, legal documents, market conditions, and personal goals, a business owner can ensure a well-timed and profitable exit.
About Greater Prairie Business Consulting, Inc.:
Greater Prairie Business Consulting, Inc. is an award-winning, national consulting practice serving entrepreneurs, small to mid-sized privately held and family-owned businesses and middle market companies of any type with revenues between $1 million and $250 million. The firm helps small, mid-sized, and middle market companies maximize their performance and exit.
Greater Prairie Business Consulting, Inc. can be reached by calling 1-800-828-7585 or emailing info@gpbusinesssolutions.com.
About the Author:
James J. Talerico, Jr. is an award-winning author, speaker, and a nationally recognized small to mid-sized (SMB) business expert.
With more than thirty- (30) years of diversified business experience, Jim has a solid track record and an A+ BBB rating helping thousands of business owners across the US and in Canada tackle tough business problems to improve the performance of their organizations.
His client success stories have been highlighted in the Wall St. Journal, Dallas Business Journal, Chicago Daily Herald, and on MSNBC’s Your Business. He was named “Texas Business Consulting CEO of the Year,” by CEO Today Magazine, identified as a “Top 10 Management Consulting Entrepreneur to Watch in 2023” by Entrepreneur Magazine, was listed among the “10 Most Visionary Companies to Watch in 2023” by Inc. Magazine, and has also been ranked among the “Top Small Business Consultants” followed on Twitter.
For more than half a decade, Jim was a regular guest on “The Price of Business,” a nationally syndicated radio program on Bloomberg Talk Radio and has also appeared as a subject matter expert on many FOX Radio interviews. He is a regular contributor to several blog sites and has frequently been quoted in publications like the New York Times, Dallas Morning News, Philadelphia Inquirer, The Entrepreneur’s Review, and on INC.com, in addition to numerous, other industry publications, radio broadcasts, business books, and Internet media.
Jim received a Gold “Stevie Award” for “Thought Leader of the Year,” a Gold “Stevie Award” for “Media Hero of the Year During Covid” and a Bronze “Stevie Award” for “Best Entrepreneur” in the Category of “Business and Professional Services” at the American Business Awards ® in New York City. The competition received more than 3,700 nominations and is the premier accolade for business excellence in the US honoring organizations of all sizes and industries. Jim also received an “Outstanding Leadership Award” at the Money 2.0 Conference for his contributions to the financial services industry.
Jim is the author of “8 Steps to Becoming an ETHICS FOCUSED ORGANIZATION,”™ a small business certification program that utilizes a unique eight – (8) step approach for strengthening ethics in any organization. The certification program won the Better Business Bureau’s “Torch Award for Ethics” for the North – Central Texas Region, the International Better Business Bureau’s “ Torch Award for Ethics,” and a Gold “Stevie Award” for “Ethics in Sales” at the International Sales & Customer Service Stevie Awards ®. Participants who complete this certification program are eligible to receive eight – (8) continuing education units from the University of Texas’ Division of Enterprise Development.
Jim received his Certified Business Exit Consultant (CBEC) ® designation from The International Exit Planning Association (IEPA) to help entrepreneurs, small business owners, family businesses, and middle market companies maximize their business exit, and he received his certification in succession planning from the ASPE.
Jim is also a Certified Management Consultant (CMC) ® and an active member of the Institute of Management Consultants. The Certified Management Consultant ® mark is awarded by the Institute of Management Consultants USA (IMC USA) and represents evidence of the highest standards of consulting, a commitment to continuous development, and an adherence to the ethical canons of the profession. Less than 1% of all consultants in the world are Certified Management Consultants (CMC) ®
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