Business Exit Planning

Tuesday, May 04, 2010

Working Smarter

We encourage business owners to work smarter, not necessarily harder, to prepare for the day when they are ready to sell or transfer their business.

We suggest that every action you take to exploit new opportunities or every cut you make to create a leaner and meaner company, that you do so while asking: How does this action get me any closer to my goal of leaving when I want, for the amount of money I want, and leaving the company to the successor I choose?

Create manageable goals for your exit. Create a list of small action steps for each goal with deadlines. Choose an advisor to help you create a roadmap and to hold you accountable. Give serious thought to working on, not in, your business so you can leave the way you want and when you want.

Friday, April 23, 2010

How Much Cash Will You Need From the Sale of Your Business?

How much cash will you need from the sale of your business to enjoy a financially secure post-business life? Most business owners do not know the answer. We recommend you work closely with a financial advisor to set a realistic assumption for a rate of return on your investments. It's important to understand the life expectancy numbers for you and your spouse, and to establish a post-exit annual income amount to determine what you will need to enjoy the retirement you deserve.

As a business owner, your "resources" are both in the business and outside of it. You need to know the value of each so you can then determine if there is a gap between the amount of money you will need in the future and what you have today. This gap must be quantified, and you must create and implement a plan to close that gap. Most owners use an experienced financial planner to help with this project.

Exit planning takes time if a business owner wants to leave on their own terms. This planning process begins when owners understand their ultimate objectives and what they have to do to reach them.

Tuesday, April 06, 2010

SBA Rule Changes Make Exit Possible for More Owners

Owners of closely held businesses face many potential challenges to successfully exiting their business and transitioning it to a new owner.  One common hurdle that they must overcome is finding a buyer capable of securing adequate acquisition financing for a business where much of the value is in the "goodwill" of the company.  Recent changes to the Small Business Administration's 7(A) loan program should help to alleviate this problem for many owners. 

  "Under new rules, any amount of goodwill (up to the overall lending limit of $2 million) may be financed so long as there is at least 25 percent equity provided in any combination of borrower down payment and seller stand-by financing.  In addition, the SBA has temporarily increased its guarantee from 75 percent to 90 percent of the loan amount, and has waived the guarantee fee charged to borrowers.  In a nutshell, the new rules make acquisition financing easier for borrowers, provide clarity and additional security for lenders, and significantly increase availability of SBA financing at a time when it is needed more than ever."

There are many other factors that must be in place in order for a business owner to succesfully complete their exit, but those who have taken the time to plan their exit will be well situated to take advantage of these favorable changes.