Many entrepreneurs work for the rest of their lives to develop their business. Spend a lot of time and invested all the funds available to meet the ongoing needs and challenges involved in successfully running the company. When they finally get around to thinking about planning a way out, they have come to the realization that all their wealth tied up in this company. Nationally, the largest proportion of the accumulation of personal wealth owned by the business owner is in the form of liquid assets.

Most business owners feel that when the time comes that they will only offer their business for sale. In fact, only about 20% of successful business sold to buyers from outside. There are many factors involved in the sale of business: overall economic conditions, credit availability, current trends in the industry, and many others. Even if you have to find buyers who are interested, there is no guarantee that you and he or she will come to the same understanding of the fair market value must be placed on a specific company.

Research has shown that most small business owners using the company as the main source of income. They saw the company as the job effectively and not regard it as an investment. As a result, some small business owners are ready both financially or emotionally to go out of their business until the last minute, or until they are forced by illness or death.

Unfortunately most of these same owners fail to start the process of planning out far enough in advance so that appropriate consideration and evaluation of all options available to open the liquid wealth. Previous owner came out to start the planning process even more options available to him. In general, we can expect the following action plan may be associated with the exit time remaining lines:

Year to Exit Possible Options

0-2 years to sell the first buyer at the highest price offered

Sell or 2-5 years of private equity recap

5 to 7 years of sales or purchases management

7-10 years selling, purchasing management, or ESOP

10 plus years to grow the business and investment diversification

Forced to sell to the first buyer who comes to the owner in severe losses in the negotiations. Purchasers are usually only interested in buying the physical assets of the company. They want to minimize the number of “good faith” that produces pay for intangibles like reputation in the market, customer relations, brand identity, and other intangible assets can not quickly be depreciated for tax purposes but must be amortized over an extended period. Lenders are also reluctant to consider good faith as collateral in financing transactions. Owner wants to sell shares in the company’s fair market value the value of intangible assets and intangible assets and capital gains taxed (15% based on the current tax code) at the time of sale. If the agreement is based only on the sale of hard assets, the result will be subject to income tax rates (35%) and then estate taxes (45% after a few exceptions) for the death of its owner.

Sell the company may not offer the best opportunity for the owner to realize the maximum financial return, or, sometimes more importantly, leave a legacy to his family or key employees. Of course, how it was sold or transferred will have a significant impact on the after-tax amount that the owner must maintain. It issued a comprehensive strategic plan to assess the different options to ensure that the owner of the goals and objectives are met. Exit planning process broadly as follows:

1. Owners are trained through a process of goal setting that reveals all the goals and desires that must be considered.

2. Owners set a time frame when he wants to achieve financial goals to consider the needs and interests in continuing involvement in corporate management.

3. Different alternatives to transfer ownership are explored and classified as to preferences and the ability to achieve corporate organization.

4. The best option (s) and then judged by the determination of after-tax return.
5. Exit strategies developed to achieve the goals selected by the option owner transfer of ownership.

6. Action plan designed to implement an exit strategy in a period of time. This may involve financial restructuring, organizational development, marketing focus, operations assessment, internal controls or in other areas would require attention.

Exit strategy should be part of the business plan. This can be saved as part of a secret which has a very limited distribution, but it is an important consideration that has a bearing on the part of the plan. Develop a business plan to talk about the company and increase profits, but the core of the plan must target the after-tax return on investment for owners and financial partners.

Usually business owners have a number of advisers they trust to provide answers to various types of questions that arise. Generally, if they are lawyers, tax accountants, insurance agents or financial advisors is specific advice for specific questions and situations. Many times, the advice is also self-serving practices by experts and certain compensation structures. Rarely is one specific advisor can provide business owners with comprehensive evaluation and recommendations within the framework of a comprehensive multi-issues such as how best to get out of your company and receive the maximum after-tax return on your investment lifetime of blood, sweat and tears. For this, you need a professional business advisor to draw together all the inputs and provide an unbiased assessment of alternatives and evidential results.

Given what is important is not the sales price or appraisal business, but the amount to be the owner to maintain when it’s over. Careful planning and comprehensive study of alternatives will increase the likelihood that the owners will be pleased with the results.

thks