8 Reasons It’s a Good Idea to Begin Planning Your Business Exit Early
1. Transition Planning Preserves Enterprise Value – A BCG study found a “28-percentage point differential in market capitalization growth between companies that had planned transitions and those that had not.” (Boston Consulting Group study of 200 family business transitions 1995-2014)
2. Things Happen – Every business needs a contingency plan in case something happens to the owner. It is a healthy business practice and a courtesy to partners, customers, employees and family.
3. Healthy Change Takes Time – Start succession planning early. It is important to take a team approach to crafting the company’s desired succession plan. Investing early in developing that infrastructure pays dividends later.
4. If Family’s Involved, Expect Extra Work – Plan to invest time and thought in establishing family governance cohesion and legacy guidelines.
5. Transparency Breeds Trust – Communicating that the owner is actively engaged in long-term succession planning inspires confidence and diminishes the spotlight when an exit is imminent.
6. Building Transferable Value is a Process – One sign of a strong business is how it operates with its leader absent. Taking time to train, manage and teach the executive team can strengthen the business and make it more valuable at exit.
7. Life Will Change – There’s a Chance to Make it Better – Intentionally planning for life after the exit allows the owner to adjust to the idea of change, exercise control, design a realistic and appealing plan, and ensure it is affordable.
8. They Want More Money In the Bank – Securing financial independence from the business is a key objective of most exits. By aligning owner objectives, personal financial needs, estate planning strategies, philanthropic goals and tax consequences, prepared owners position themselves to achieve the most favorable outcomes.