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Why Business Owners Should Care About Exit Planning

     Copyright (c) 2014 Joe Maas

Here's the crux of the matter: You own a business, and you've grown this business to its present level of success. Now, for whatever reason, you are interested in either establishing new business objectives and financial goals, or assessing the value of your current objectives for achieving those goals. This is the most important task of all, because knowing your outcomes will guide your decisions, often saving you valuable time and money.

Your business goals may include any of the following. Perhaps you are looking forward to retiring in five to ten years, and want to know the true market value of your business with certainty; most business owners overestimate the value of their business because they don't know how the market assesses a business's value, and thus are unprepared, disappointed, and in fiscal danger. Furthermore, with this in mind, there is a lot to know about how to organize your business for a third party sale, or how to organize your business for a family member to assume ownership. Another goal may be to prepare your business for the disruption caused by the death of a business partner, or your own death. And, disability is another risk you may want to address because if you or one of your business partners were unable to work for an extended period of time, there would be no business as usual. Divorce is common, unfortunately, and when you or a business partner is confronted by this serious emotional and financial situation, your business can suffer major repercussions.

Risk is a factor of business, and while there are many risks, there are also many ways to ameliorate these risks so when the unthinkable happens, you are prepared with plans that protect your years of work. This book offers solid and sensible solutions to the many risky situations you and your business is likely to face some day.

Knowing your financial goals and objectives from the very first day you start your business is best, so all your decisions are made, in spite of the tumultuous conditions of the business universe around you, with your exit in mind. Benjamin Franklin said it best, "By failing to prepare, you are preparing to fail."

To get started, first, you need to what the business exit planning process is. In simple terms, it is the process of preparing a business for transition from the current owner to the next owner. While this sometimes means the sale of the business to a third party with the intention of acquiring the cash value of the business the owner has created by building and growing the business, exit planning is not just about getting a business ready for sale a few months before the owner wants to retire. Rather, when done properly, the business owner is engaged with a carefully constructed multidisciplinary management plan that provides accountability through a clear, reasoned, and systematic structure for achieving financial goals.

The exit planning process requires the owner or owners to identify their long-term financial goals so the eventual sale of the business can meet those monetary goals. This means the current value of the business must be calculated so a business growth plan can be created that builds business value in accordance with a realistic timeline. The next step is following the plan so the business value is increased, usually by increasing economic benefits and reducing the many varieties of risk. Ultimately, the owner will leave the business, so a plan for transition must be in place to assure the safe and efficient progression. That's why exit planning is so important.

Article Source:

Is your business worth enough to secure your retirement? If you don't know, read "Exit Insight: Getting to 'Sold!' by author Joseph M. Maas of Synergetic Finance. Get your copy now

Posted on 2014-05-30, By: *

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Note: The content of this article solely conveys the opinion of its author.

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