Blog Post Sponsored by McGill Junge Wealth Management
Author: Trent Burley – Private Wealth Advisor at McGill Junge Wealth Management
Planning your exit from your business might feel like a distant prospect, but we feel that exit planning is simply proper business planning and a process that should begin long before you’re ready to transition out. To simplify the complex process of exit planning into actionable concepts that every business owner should understand, we use the Exit Planning Institute’s 5-4-3-2-1 framework. It encourages a proactive approach, integrating exit planning into your business strategy from the outset, rather than treating it as a last-minute task.
- Five Stages of Value Maturity: Identify, Protect, Build, Harvest, and Manage. These stages provide a sequential roadmap for enhancing and preserving the value of your business.
- Four Intangible Capitals: Human, Structural, Customer, and Social capital. Strengthening these “knowledge capitals” is critical for increasing business valuation, as they represent crucial assets often overlooked in traditional accounting systems. A business’s ability to thrive independently of the owner often hinges on these intangible assets, particularly strong structural capital encompassing systems and processes.
- Three Legs of the Stool & Three Gaps: Business, Personal, and Financial planning. A successful exit requires balancing these three crucial areas to ensure a smooth transition that meets all of the owner’s objectives. Furthermore, the process addresses the Three Gaps – Wealth, Profit, and Value – that often need to be addressed to align personal financial goals with the business’s value. Closing these gaps is essential for maximizing the value harvested from the business and ensuring the owner is financially prepared for their post-exit life.
- Two Concurrent Paths: Improving the business and planning for personal and financial futures. This dual focus is crucial for a successful exit, ensuring that the business can operate and thrive independently of the owner while simultaneously preparing the owner for their next chapter.
- One Goal of Exit Planning: As outlined in the white paper, a goal would be to achieve a successful transition that satisfies the owner’s business, personal, and financial needs and desires.
Engaging in exit planning early provides the opportunity to maximize your business’s value and secure your financial future. Implementing the principles outlined in the 5-4-3-2-1 framework requires a strategic approach and often involves building a team of qualified advisors, such as your financial advisor, CPA, estate planning attorney, business attorney, banker, and investment banker. Together, your personal team can guide you through the Value Acceleration Methodology, helping you align their business, personal, and financial goals, and ultimately achieve a successful exit.
To explore more about integrating business, personal, succession and exit planning, email trent.burley@nm.com or visit https://www.mcgilljunge.com/.
