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Why Exit Planning?	Are you like many business owners? A majority of closely held and family owned businesses will change hands within the next five years1; but Many Business Owners may not have taken active steps to transition out of ownership.
Setting Exit Objectives - Step One	"When a man does not know which harbor he is heading for, no wind is the right wind." So said Seneca almost 2,000 years ago. Today, speaking to business owners he might likely say, "Exit Planning for business owners must start with knowing your exit goals and objectives; otherwise, failure may be inevitable."
What Is My Business Worth? Step Two	For many owners, the answer to one question determines their eagerness and ability to leave their companies: "How much is my business worth?" This question is indeed critical and answering it is the second step of your sevenstep Exit Plan.
Working On — Not In — Your Business - Step Three	A number of years ago, I met with Diana Duff, the owner of Major Machining, Inc. (MMI), a machine shop. She wanted out. I suspected that her severe case of "early onset burnout" was due to the departure of her three-person management team six months earlier. These employees had not just left the company, they had set up a competing machine shop funded by the many MMI customers they took with them.
Getting Top Dollar For Your Business Step Four	What is a good way for you to get top dollar for your business? First, consider selling to an outside third party, not to an insider such as a child, key employee or co-owner. Outside third parties typically have the cash and the ability to pay a higher earnings multiple for your business.
Transferring the Business to Children or Employees: A Recipe for Disaster? - Step Five	How do you successfully transfer your business to a child, key employee or coowner? The most successful method is to follow a recipe that mixes, in equal measure, three key ingredients: One part: the ability, experience and dedication of the prospective new owners; One part: a company with strong, consistent cash flow and little debt; and One part: a transaction designed to prevent income taxes from eroding the cash flow available to you, the seller.
Planning for a Rainy Day - Step Six	There may be nothing worse for a business than to have its owner suddenly die . . .especially if it's your business. Let's look at what can happen when an owner dies.
Preserve Wealth: Give it Away! Step Seven	The last step in your Exit Plan is Wealth Preservation Planning. But that doesn't mean you should wait until you are out of the business to begin actively preserving your wealth. In fact, if you wait until the value of your business is converted to cash, it may be too late to realize all of the benefits of wealth preservation. The most significant and powerful claimant to your wealth is the IRS — especially in the estate tax arena.
Why Business Owners Fail To Plan	Franklin Taft was understandably a bit neurotic. He was increasingly anxious to begin planning for his eventual departure from his business but his concerns prevented him from proceeding. "I'm too busy working in my business to think about how to leave it. Besides, I don't know what to do-and neither do my advisors."
Transfers to Insiders	When transferring your company to insiders, a Low Value can put Dollars in your pocket. Owners of successful businesses valued between $5 and $10 million face two difficult exit problems1: Cash buyers are usually seeking larger companies; and Owners are generally unwilling to assume a long-term installment note because of the risk of non-payment.
ESOPs: Exit Opportunity for Business Owners	Aesop is famous for his stories that teach important lessons but are fictionaland often fantastic. Our topic today, ESOPs (Employee Stock Ownership Plans) is similar. Fictional and often fantastic claims are made about what ESOPs can and cannot do. ESOPs can help business owners to achieve a number of important Exit Planning goals-namely, selling a business tax-free to employees for full market value. But as with a fable, readers must take care to separate the important lesson from the fiction. What can or should you believe about ESOPs? Read on.
Sole Owner Continuity Plan	Making Sure the Business Continues When You Don't Greg King barely survived helping his oldest son learn to drive and now it was time to teach his younger son. Before putting himself through on-the-road training one last time, Greg called his life insurance representative. "I have no co-owners to buy my company if I don't come home. What can I do?"
Former Business Owners Express No Regrets About Selling Out	"I can't play golf every day." "My wife wants to see more of me — but not at every breakfast, lunch, and dinner!" "What do other ex-owners do after they've sold out?" Failing to answer these concerns can create vacillation, reluctance, and ultimately, an unwillingness on the part of many owners to proceed with planning for their business exits.
Protecting Assets	To engage in Exit Planning, you must have a business to exit. Exit Planning assumes that the better the business, the easier and more successful the exit. Exit Planning also assumes that good businesses are not only profitable and well managed, but that they are protected from liability risks. Failing to protect your business value from legal liabilities is a fundamental Exit Planning failure.
Transfer Your Business And Avoid The Deal Killer: Taxes	When you started your business, you may have had issues on your mind other than choosing the best corporate entity form for an eventual sale. Now that you are thinking about your exit, however, entity choice (C or S corporation) has become critically important. That's because selling your company's assets inside the wrong entity can cost an extra 40 percent in taxes of your sale price: an unacceptable prospect for most owners.
Finding The Right Advisor	Your job as a business owner "My investment advisor suggested that I sell my company to an ESOP. Is that a good idea?" My estate planning attorney recommended that I begin giving my business to my children. What do you think?" "I'm getting tired of running my business every day. My accountant thinks a sale to a third party is a good idea. What's your opinion?"
Bonus Incentive Plans for Key Employees	What's the point? "I want to install a bonus plan for my key employees to reward them for their performance." "One of my best employees left last week for a company for more money. I think I'd better install a good bonus plan to stay competitive in the marketplace."
Characteristics of Successful Employee Bonus Plans	Too often, owners discover that the compensation plans they've put in place for key employees are sadly inadequate only when those key employees leave their companies for greener pastures. The departure of one or more of these key employees can not only complicate your daily business life, but it can slam shut the door on your exit plans. Without experienced management in place, it may be unlikely that you will be able to leave your business in style. In fact, you may not be able to leave it at all. Key employees are aptly named not only
Vesting: Handcuffing Key Employees To Your Company	In the previous issue of The Exit Planning Review™, we outlined the four characteristics of a successful Employee Incentive Plan. Namely, such plans should: Be specific, not arbitrary, and be in writing; Be tied to performance standards; Make substantial bonuses; and Handcuff the key employee to the business.
Getting Started In The Exit Planning Process	Nora Chapman's story was typical of most business owners. At age 54, she was ready to leave her 25-employee advertising business. She was thinking of selling to one or two of her key employees and when we met her, her first question to us was: "Is this the right exit choice?"

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