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Exit Planning

Exit planning, also known as preparing a company for a sale, can assume many distinct aspects or phases. Business owners need to carefully assess which professional resources/services are really needed, and which fulfill secondary objectives. Often, given a reasonable lead time before a sale, the owner(s) will rely on the most trusted professional advisors to provide a step-by-step plan to achieve maximum enterprise value.

The keys to determining which areas require improvement are the following:

  1. Define Objectives: Clearly outline your objectives for the sale. Understanding what you want to achieve will guide your decisions throughout the process.
  2. Financial Preparation: Ensure your financial records are accurate, up-to-date, and transparent. This includes organizing financial statements, tax records, and any other relevant documentation. Conduct a thorough financial analysis to determine the company’s valuation.
  3. Enhance Business Value: This may involve improving operational efficiency, boosting revenue streams, improving product/service margins, strengthening customer relationships, or expanding market reach.
  4. Due Diligence: Buyers will conduct due diligence on your company, so be prepared to provide comprehensive information.
  5. Legal and Regulatory Compliance: Ensure your company is in compliance with all legal and regulatory requirements. Address any outstanding legal issues or litigation, contracts, or liabilities that could affect the sale process.
  6. Negotiation Strategy: Develop a negotiation strategy to achieve favorable terms in the sale agreement. Consider factors such as price, payment structure, employee retention, intellectual property rights, and post-sale involvement.
  7. Tax Planning: Work with tax advisors to optimize the tax implications of the sale. Explore strategies to structure the deal to minimize taxes, such as stock contributions to a CRT, Charitable Remainder Trust, or a sale to a Complex Children’s Trust.
  8. Customers and Vendors: Provide the agreements with these third parties. In addition, to avoid customer concentration issues, provide the rationale for valuable customer relationships, as well as special vendor pricing.
  9. Insurance: Ensure that all types of insurance coverage is included and in place, such as property and casualty, general liability, cyber security, etc.
  10. Real Estate: Any lease agreements should be current and assumable. If property is rented from the owner(s), market rent should be determined. Or will the property be included in the sale.
  11. Capitalization: Ensure that the capitalization table is updated and outstanding options and warrants are clearly defined. Any stock purchase agreements should also be noted.
  12. Employees: Details should be available for any contractual agreements, including compensation, pension, profit-sharing, retirement or other employee benefit plans. In addition, clear delineations of roles within an organization chart should be available.
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