Prepare a Strategic Succession and Exit Plan

Ideally you should begin planning your exit five years before you leave your business. This gives you plenty of time to determine what you want to accomplish, make adjustments and implement the plan.

Of course if you are like most people knowing when you are five years from leaving your business may be problematic in itself. For that reason we believe every business owner should carry on some level of exit planning.

If you are too young to work on an exit plan your may want to call it a succession plan. We would combine that with a buy sell agreement if you have partners. Insure your death to provide for you spouse, perhaps with an insurance trust. If you desire or need to, insure your death to pay your bills and you have an effective plan succession plan for many small businesses. More difficult is disability. This can be insured but the price can be significant. We would recommend you seriously consider disability insurance if your health allows it.

If you have, partners make sure you have a buy-sell agreement. Again, death is easy for most people because of the reasonable cost of term life insurance. More complex is how feuding partners can separate. Deal with this when you are starting. If you cannot work out a fall-back agreement then, think what it will be like if the business is not doing well and one of you wants to leave. Don’t always assume it will be your partner wanting to leave either. Few owners we talked to thought they would voluntarily leave their business when they started it.

Address these matters at all times in your business life. We will continue with this topic in a future post. Thanks now.

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