Realize Your Legacy: Mastering the Art of the Business Owner Exit Strategy

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2023-9_Realize Your Legacy- Mastering the Art of the Business Owner Exit Strategy

By Adam Brooks, CFP®

It has taken years of dedication and hard work to bring your business to its current success. While it might seem premature to discuss an exit strategy, it is a critical element of your overall business plan. Your exit plan can significantly impact various business decisions, as it presents options such as initial public offerings (IPOs), strategic acquisitions, or management buyouts (MBOs).

All business owners eventually face the need to transition their business, making proactive planning essential to reaching both their business and family goals. Surprisingly, almost half of business owners with future plans to sell their business lack a formal exit plan. So, what are the benefits of creating an exit strategy? For many business owners, it can position them favorably for tax purposes when the time comes to make a move.

Let’s delve into what ABLE Financial Group covers in our comprehensive strategic exit-planning process.

Stage 1: Initial Discovery Meeting

Defining exit objectives and goals:

  • What is your desired departure date?
  • What are your income/financial security requirements?
  • What exit routes are open to you?

Stage 2: Information Gathering

Personal financial analysis: 

  • Review existing financial, estate, and business plans.
  • Determine gaps in each of these plans, if any.
  • Discuss your wants and needs. 

Stage 3: Determination of Business Value

Current valuation and the development of value drivers:

  • Analyze each exit route to determine how to protect and increase business value and understand the tax implications of ownership transfer through sale, gift, and estate. 
  • Obtain a formal valuation performed by an independent third party to set a fair price for company stock based on a consistent methodology for valuing the stock in the future. Include a reasonable discount for lack of marketability and minority interest, if applicable. This provides a benchmark for buy–sell agreements and executive compensation, equity-based plans, etc.

Stage 4: Choosing an Exit/Transition Route

  • Sell to an outside third party (financial or strategic buyer).
  • Sell to employees using an Employee Stock Ownership Plan (ESOP)*.
  • Sell the business to one or more key employees (management buyout).
  • Sell to remaining shareholders.
  • Transfer the company to a family member(s).
  • Retain ownership but become a passive owner.

Stage 5: Implementation of Chosen Business Exit Route and Post-Transaction Servicing

  • Engage shareholders and the company to execute the chosen business exit route (external or internal sale or transfer).
  • Develop a contingency plan for the business (outline key succession management and be able to answer who will run the business in the event of a death or disability of current operational shareholders).
  • Develop a contingency plan for the owner’s family (financial, estate, and charitable planning).
  • Develop an ongoing servicing plan for the business and family (ongoing review to ensure that planning is being followed and to advise in the event of life changes within the family or succession management).

Partner With a Trusted Professional

Creating a solid succession plan can understandably feel challenging and overwhelming. For many business owners, their strength lies in running their business rather than planning for its future transition. This is where advisors can make a big difference by guiding owners through a straightforward and comprehensive process—from start to finish.

At ABLE Financial Group, we’ve supported many clients in tackling these specific issues and are here to assist you as well. Whether you’re facing complex decisions about succession, navigating the transition, or preparing for the next chapter, we’re here to lend a hand. To learn more about our team and the ways we can help guide you, call 480.258.6108 or email today.

About Adam

Adam Brooks is Managing Director at ABLE Financial Group, a financial services practice that focuses on transition planning and simplifying the complexities of their clients’ wealth. As a CERTIFIED FINANCIAL PLANNER™ practitioner, Adam has been guiding individuals, businesses, and non-profit organizations toward their financial goals since 1993. Co-founding ABLE Financial Group in 2006, Adam oversees the practice, working with business owner clients, primarily focusing on succession planning and mergers and acquisitions (M&As).

Adam obtained degrees in finance and accounting from the University of Arizona and holds the CFP® certification. Adam was recognized as one of Barron’s Top 1,200 Financial Advisors in 2021 and 2022, and was named a 2022 Forbes Best-in-State Wealth Advisor. Outside of his work as a financial advisor, Adam has taught a variety of courses at surrounding community colleges, including Successful Money Management Seminars and Rich Dad’s Cash Flow courses. Adam also previously hosted a radio show called The Truth About Money.

When not serving his clients, Adam actively serves his community in a variety of leadership positions. In 2011, Adam and co-founder Lee began funding the ABLE Financial Group Philanthropic Fund at the Jewish Community Foundation, allowing them to support some of their favorite organizations and causes today and into the future. Adam lives in Scottsdale with his wife, Cindy, their three sons, Jordan, Dylan, and Cameron, and their two dogs, Nelson and Sunny. Adam is active in his children’s lives, an avid cyclist, and enjoys local hikes with his family. To learn more about Adam, connect with him on LinkedIn.

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