The Seven Step Process

Creating an effective plan to exit your business requires collaboration with a number of professional advisors on a broad range of issues. At Exit Planning Partners, we follow the Seven Step Exit Planning Process™ developed by the Business Enterprise Institute and refined over 25 years.

Step 1 – Owner Objectives

Selling your business starts with a definition of what you want and need from the Exit Planning Process, in other words, what a successful exit from the business means to you. Determining what you want is the most important step of the entire process.

• When do I want to sell my business?
• What is the annual after-tax income I want after I sell my business?
• To whom do I want to transfer the business?

Step 2 – Business and Personal Financial Resources

Determining what personal assets owners have, how much the business is worth and how much cash flow the business can generate for Exit Planning is the next step. The current value and projected cash flow, along with other non-business assets and income, are used to determine the paths and planning tools available to reach the owner’s objectives.

Step 3 – Maximizing and Protecting Business Value

The elements that build the value of a business or protect the value the owner has worked so hard to create are called Value Drivers. In Step Three, owners and their advisors identify which Value Drivers are important to meet the owner’s overall exit objectives and devise specific steps to maximize the impact of the Value Drivers.

Step 4 – Ownership Transfers to Third Parties

During Step Four, owners who want to sell their business to a third party will work with their advisors to identify ways to do so in the manner that results in the most beneficial sale price and terms. Not all business owners go through Step Four – those who don’t either retain their ownership long-term or skip to Step Five.

Step 5 – Ownership Transfers to Insiders

Step Five includes a detailed plan to transfer the business to insiders (children, key employees or co-owners). Careful planning in Step Five allows the owner to receive both the desired value from the business while minimizing risk and the resources of the business should the purchaser have little or no personal capital.

Step 6 – Business Continuity

Step Six prepares the owner for the contingencies that affect the business and its owners. A complete Exit Plan incorporates potential changes, such as death or permanent disability of an owner, so that the owner’s objectives can still be achieved if circumstances change.

Step 7 – Personal Wealth and Estate Planning

The sale of a business generates cash for owners, their families and the IRS. During Step Seven, owners and their advisors create a plan that not only preserves wealth, but minimizes taxes using both lifetime and estate-planning tools.