Business exit plans: Steps to maximizing value

Editor's Note

This article is sponsored by OPES Family Advisory and is part three in a six-part series. Click here to read the previous articles.

In the previous blog, I reviewed step one and two of our seven-step process to create a successful business exit / transition plan. In this blog, I will cover steps three and four in greater detail.

Step three: Focus on business value

There are three parts to focusing on business value:

  1. Increase the value of your business;
  2. Protect its existing value; and
  3. Minimize current tax liability and liability when you transfer ownership.

Increase business value

An inevitable byproduct of a consistently well-run business is consistently increasing value. There are numerous actions an owner can and should take to maximize value. 

These include the following:

  • Maintaining and consistently increasing cash flow;
  • Creating and using efficient systems;
  • Documenting the sustainability of earnings; and
  • Motivating and keeping key employees.

This step goes to the heart of a successful business and to the essence of your role within the business: to enhance value.

Minimize risk

A future buyer may not even consider purchasing your company if there’s a risk that its value will decrease. Have you taken steps to make sure your key employees stay with a new owner after you exit?

  • Should there be employee incentives in place?
  • Should there be non-compete clauses in place?

Minimize tax liability

There are a number of tax-minimizing techniques owners employ as they work toward their exits.

At best, it takes years to reap the benefits from most tax-planning strategies. Assuming both income- and business-tax rates are likely to increase, can you afford to wait to investigate various tax-saving strategies?

Step four: Sale to a third party

There are a variety of ways to market a business for sale, but if your company is worth at least $2 million, one of the best ways to reap top dollar is to use the services of a business broker and engage in a negotiated sale. 

This process maximizes sellers’ leverage and enables them to select the sale price, deal structure, and ongoing operating philosophy that are most attractive.

Key to the success of this process is the ability to bring a large number of qualified buyers to the table at the same time.

Again, a key to success is using the most capable broker available. If you wish to be introduced to a broker, please contact us.

Final thoughts

Certainly, the decision to sell the business you created and nurtured is an intensely personal one. No one can tell you when to exit your business or what to do with the rest of your life. Having worked with other owners, we can help guide you through the process of preparing for the biggest financial event of your life.

We can help you consider all of the factors associated with exiting your business and help you complete your exit objectives.

If you would like an illustration of the seven-step path from where you are to your successful exit, please ask us for our exit plan roadmap. And be sure to keep an eye out for part three of this six-part blog series.

OPES Family Advisory's  mission is to continually strive to be the premier wealth management provider to our clients. Through our unique wealth management process, we provide our clients with the intellectual framework to make sound financial decisions. We continually work to provide our clients with unparalleled personal service and peace of mind to allow them to dream, plan and prosper.

Dean Trudeau, CFP, OPES Family Advisory founder began his investment and advisory career in 1987 and has held the designation of certified financial planner for more than 20 years.

His impressive career has grown over the years to include principal of Horizon Financial Services, sales manager of Manulife Financial/Manulife Securities and district vice-president of RBC Global Asset Management.

Trudeau has a deep commitment to his field and over the years has been recognized with many industry awards and has been asked to speak at a variety of conferences. Along with a deep commitment to the profession, he believes strongly in working closely with all his clients in aspects of their lives to give them peace of mind.