Exit Planning in its simplest form is helping the business owner accomplish his or her goals for post ownership life. Those business owners who take time to plan their exits increase their chances of success.
The seven step exit planning process is summarized as:
- Identify Exit Objectives
- Quantify Business and Personal Financial Resources
- Maximize and Protect Business Value
- Ownership Transfer to Third Parties
- Ownership Transfer to Insiders
- Business Continuity
- Personal Wealth and Estate Planning
Harwell Valuation Advisors works with the business owner and their key advisors to understand the business owner’s objectives and to assist them in getting to where they want to be. The process starts with a lot of questions, including what is the value of their business as often times the business is their primary asset.
The exit planning process addresses the business owner’s other financial resources as well, and as a result their financial advisor will play a major role. Determining when the business owner wants to transfer their business, how much money do they need, whom do they want to transfer the business to, and what are their business continuity goals are key issues that will be addressed in the exit planning process. Because personal wealth management and estate planning are critical elements to a successful exit plan, the business owner’s estate attorney will be actively involved. As exiting a business has tax consequences, the business owner’s CPA will also be involved in the exit plan.
Ultimately, the business will be transferred whether to a related party, an insider or to an unrelated third party. The price paid for a company will change depending on the type of the buyer and the terms of the deal. For example, a strategic buyer may well pay more than a financial buyer, while an internal buyer will typically pay less. However, a sale to an internal buyer is often preferred for a myriad of reasons beyond price alone.
Understanding a company’s value is a crucial and time-consuming part of the transaction process. Harwell Valuation Advisors assist in understanding the dynamics of the marketplace, the business and industry risks, and the opportunities to increase shareholder value.
When determining a company’s value, we perform detailed analysis of:
- Financial condition and operating performance (both historical and forecasted)
- Industry trends and expectations
- Economic environment
- Intangible asset value
- Market price of similar public companies, if applicable
- Recent sales of comparable companies
Harwell Valuation Advisors provides the following benefits when a business owner is ready to transfer their interest:
- Has knowledge of a company’s potential value to different types of buyers.
- Can set a reasonable starting range for negotiations
- Advice on the appropriate timing of the transition
