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How can business owners plan for an exit?

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Edward Jones - Chad Choate, AAMS

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Posted on

Feb 02, 2024

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Florida - Sarasota, Bradenton & Charlotte Counties

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If you’re a business owner, you always have a lot to do and a lot to think about. But have you put much thought into how you’ll eventually leave it all behind?

Even if you’re a few years away from that day, it’s a good idea to create an exit strategy. If you’re like most other owners, most of your net worth may well be tied up in your business — so how you exit that business can have a big impact on your finances and your retirement.

As you begin the exit strategy process, you’ll need to examine some basic questions, such as how much you want for your business and how much it’s worth. But you’ll especially need to plan for the mechanics of your exit — that is, just how you’re going to sell or transfer ownership of it.

Essentially, you have three main options:

• Internal sale or transfer – You could sell or transfer your business to someone affiliated with the company, such as a family member, business partner or even a group of employees. The advantages of this method are that you’ll have greater control over the timing of your exit, and you’ll be able to provide greater continuity for your employees, clients and suppliers. One potential disadvantage is that your net sales proceeds may be less than what you’d get from selling the business to an unrelated third party.

• External sale or transfer – The biggest benefit of selling or transferring your business to an unrelated third party is that you can potentially maximize your net sales proceeds. But you’ll need to consider some tradeoffs, too. For one thing, a sale to an outside person or business usually requires a long and possibly expensive due diligence process. Also, you’ll have less control over the timing of your exit than you would if you sold the business to an internal source.

• Liquidation – If you liquidated your business by selling all your assets and shutting down operations, you could end up with far fewer net proceeds than if you sold the business to an internal or external source. However, you could raise cash pretty quickly. But if you chose to liquidate or dissolve your business, it could potentially be disruptive for your employees, clients and suppliers.

Because everyone’s situation is different, there’s no clear-cut formula for deciding which of these exit options is right for you. And it isn’t simply a matter of numbers, either, because you’ll need to consider some intangible factors, too. How will your family be affected by your choice? How would you feel if your business was in someone else’s hands, or no longer existed? You’ll need to work out these issues, along with the financial ones, before you decide on your business exit strategy.

Fortunately, you don’t have to go it alone. You may want to consult your financial, legal and tax advisors, and possibly work with a commercial banker and a business evaluation expert. By drawing on several sources of expertise, you can feel more confident that you’ll make a decision that’s appropriate for your needs.

One final suggestion: Don’t wait too long before you begin putting together your exit strategy. Time goes fast — and when the time comes for you to say goodbye to your business, you’ll want to be prepared.

Chad Choate III, AAMS

828 3rd Avenue West

Bradenton, FL 34205

941-462-2445

chad.chaote@edwardjones.com

This article was written by Edward Jones for use by your local Edward Jones Financial Advisor.

Edward Jones, Member SIPC

How can business owners plan for an exit?

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Edward Jones - Chad Choate, AAMS

Long Term Care Insurance 828 3rd Ave. W., Bradenton, Florida, 34205

Hello, I'm Chad Choate a dedicated financial advisor in Bradenton, FL, I began my career with Edward Jones in 2017. As a financial advisor, I want to find out what's important to you and help you build personalized strategies to achieve your goals. As a lifelong Manatee County resident, I graduated from the University of South Florida and was a teacher in Manatee County before joining Edward Jones. My driving force is to change people's lives in a positive way, and what better place than my home to do that. Whether you're planning for retirement, saving for college for children or grandchildren or just trying to protect the financial future of the ones you care for the most, we can work together to develop specific strategies to help you achieve your goals. We will also monitor your progress to help make sure you stay on track or determine if any adjustments need to be made. Throughout it all, we're dedicated to providing you with top-notch client service. But we're not alone. Thousands of people and advanced technology support from our office can help ensure you receive the most current and comprehensive guidance. In addition, we welcome the opportunity to work with your attorney, accountant and other trusted professionals to deliver a comprehensive strategy that leverages everyone's expertise. Working together, we can help you develop a complete, tailored strategy to help you achieve your financial goals. I currently volunteer with the Manatee Hurricane football Broadcast and Booster Club, serve on my church's trustees council and have previously served as a leader in Young Life. I am a member of the Manatee Chamber of Commerce and an alumnus of their Leadership Manatee program. I have been married to my childhood sweetheart, Ashley, for 15 years and we have a son, Wesley, and daughter, Camryn. We enjoy watching our children play their sports and traveling as a family.

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