Exit and transition planning are distinct processes with a shared goal of preparing for the eventual transfer of ownership of your business for the benefit of all stakeholders involved. Both planning processes make significant changes to your business in management and operations.
What Is a Business Exit Strategy?
A business exit strategy sells your business to buyers, identifies a successor, or establishes an employee or management buyout. The intent of creating an exit strategy is to leave your business in efficient valuation and operational standing, receive the maximum financial return, and establish the time and circumstances for your exit.
What Is Transition Planning?
When creating a business transition plan, business owners prepare to make significant changes in operations, management, and company culture to promote growth, increase efficiency, reduce competition, improve value, expand financial resources, and more.
What Are the Differences?
Your exit plan is more immediate – ideally, you create a voluntary and involuntary exit plan in case of an emergency that may render you unable to carry on your business. You may not exit for another 5-10 years, but creating an exit plan allows you to leave your business whenever ready.
Transition planning doesn’t necessarily involve your exit or your immediate exit. With transition planning, you may change from a private to a public company, merge with another company, consolidate with another company to form a new separate venture, or gradually transfer ownership with an employee stock ownership plan. You typically remain in your company, but operations and management may significantly change depending on how much influence you have or keep.
How Do They Overlap?
Exit and transition planning requires business owners to make financial assessments, increase business value, and improve competitiveness. Business owners must also invest in team development to ensure a smooth transition or exit. Some of the intersecting processes include:
- Financial preparedness: in exit and transition planning, you will need to know where you stand when seeking optimal financial return or improved financial resources when considering a deal from buyers, transitioning into a public company, choosing to merge with a company, etc.
- Value building: building the market value of your business by increasing sales revenue, capitalizing on key results areas, minimizing or eliminating constraints, and more.
- Employee/successor development: in exit and transition, employees or a successor should manage responsibilities with minimal supervision to ease business exit or transition.
Do I Need Professional Assistance?
Typically, it is advised for business owners to consult with advisors, brokers, CFOS, corporate lawyers, and accountants for financial preparedness, debt management, tax assessment, business sale negotiation, protection of your stipulations, and more. A certified exit planning advisor or a business coach helps you narrow down the necessary professional resources for a successful transition or exit.
You can book a consultation with me today to get started.
