Exit planning is one of those unique win-win propositions. In the critically acclaimed book, "The $10 Trillion Opportunity: Designing Successful Exit Plans for Middle Market Business Owners", I examine the significant benefits a well-designed exit plan can deliver for a business owner.

The Benefits to Business Owners

A well-designed and implemented exit plan is a powerful and valuable business and personal planning tool. It is a process that asks and answers all of the personal, business, financial, legal and tax questions involved in selling a privately held business.  It enables business owners to: • Achieve their business and personal goals
• Facilitate their retirement
• Control how and when they exit
• Ensure survival and growth of their business
• Preserve family harmony
• Reduce employee and family uncertainty
• Maximize company value in good times and bad
• Minimize, defer, or eliminate capital gains, estate, and income taxes
• Have strategic options from which to choose

On the other side of the equation, the failure to have a well-defined exit plan results in real costs to business owners. Without a comprehensive plan, business owners typically:

• Undervalue their companies leaving hard-earned wealth on the table
• Pay too much in capital gains and estate taxes
• Lose control over the exit process
• Fail to realize their personal, financial, or business goals during the exit process

Experience has shown that a business owner who sells his business without an exit plan, typically sells it for too little. Worse yet, if they do nothing and the business is sold after they die or become disabled, the value of the business usually falls dramatically and it becomes a burden to their family. That's not the legacy most business owners want to leave behind.

Eliminate Seller's Remorse

Despite the tremendous value of exit planning, most business owners do not have an exit plan. In fact, studies by MassMutual, Marquette University, the Exit Planning Institute and others suggest that fewer than 28 percent of private businesses have done any exit planning. As a result, only 30 percent of family-owned businesses survive through the second generation.

A study by PriceWaterhouseCoopers of 300 former business owners who sold their companies showed that 75 percent of the respondents felt the sale did not accomplish their personal or financial objectives. When asked why, most business owners said they did not fully understand all of their options or the process.  When asked what they would do differently if they could do it all over again, they said they would have been better prepared.  These statistics suggest too few business owners are proactively planning for the inevitable exit process.

If you would like to understand your options better, contact the MidCap Advisors office nearest you for a free, no obligation consultation.