Exit planning can be a challenging but extremely rewarding endeavor. Shifting from a growth “day to day” mindset toward one where my clients look beyond today can be quite challenging.  However, taking time to reflect on this important journey allows business owners to explore many potential paths and to make necessary adjustments along the way toward achieving their exit planning goals and objectives. Here are a few of the questions I ask owners in the discovery phase of my work.

What do I really want?

This question takes some time to answer, as it requires serious reflection. Most business owners I work with have spent decades in their current seat running and growing their business. Taking time to envision your company from a different perspective is not automatic. Figuring out your level of involvement through your transition is critical. Some of my clients insisted on maintaining control of their business throughout the entirety of their exit plan. Others were willing to relinquish some level of control immediately. This question also leads to examining potential paths at a high level, such as selling your business to a friendly competitor who has expressed interest, or defining an inside group of executives who may have expressed interest in purchasing your business. Take some time to reflect on this question. The answers may not be obvious, but they will reveal themselves over time.

What is my timeline?

When thinking through this, try to think of other important milestones in your life that are coming up. I have a client that wants to exit their business once their spouse retires, which is happening in a couple of years. If no such milestone exists, think about the time it may take to get your executive team up to speed on important tasks and responsibilities you handle on a daily basis.  Make a list of those skills and spend some time thinking through how long it may take to transition those responsibilities.  Your timeline is not an exact number, but an important guidepost to help you on this journey.

How can I ensure my key people will stay through this transition?

This is one of the most important questions you will answer. As you know well, your key people are at the core of what makes your business successful. Taking a good, hard look at what you currently provide to your key people in terms of benefits, base compensation, and incentive compensation can ensure your company stays competitive in your marketplace.  It can also lead to important discussions regarding the makeup of your team and if there are any holes that need to be filled. I’ve worked with many companies who have realized that some of their key people may not be in the right roles or may need some mentoring in order to succeed in their current role.  Other companies have recognized through this exercise they are missing a key role on their team. It’s also important to study various incentive and retention compensation strategies that are available.  Strategies that go over and above a 401(k) or SEP IRA plan. There are strategies that offer the benefit of stock performance without actually offering stock (phantom stock). There are short term (stock appreciation rights) incentive plans and long term incentive plans (Supplemental Executive Retirement Plan) to consider. There are entities that can be formed to offer company stock as an incentive or ownership transfer strategy. (ESOP, Family Limited Partnership). Please take your time in addressing this important question, and don’t hesitate to reach out to a qualified professional who can help you through this exercise.

What are the “elephant(s) in the room”?

In the 25 years that I have been in this field, nearly every business I have worked with has identified at least one “elephant in the room” that presents a challenge as it relates to their exit and ownership transition plan. I urge you to ask yourself what you see in terms of “elephant(s) in the room” that could possibly derail or complicate an ownership transition. Sometimes it can be as simple as transparency.  Telling your team about your plans to step down and transition key responsibilities may create some anxiety in the short term, but remember this is only a short term hurdle to climb if you are willing to take the first step now.

Who can I trust on this journey?

Answering this question allows you the opportunity to start identifying a core group of trusted advisors who can help you identify potential strategies and paths to help you accomplish your objective. Some people on this team will be subject matter experts for the strategies you are exploring. Other members of this team will be trusted colleagues (other business owners) who you have confided in over the years.  Other members may be key people that you know you can trust with your plans. I’ve also had many clients rely heavily on their spouse and children for open, honest feedback regarding their plans to exit.  Remember, this is a journey and seeking open, honest feedback from those you trust and admire is a critical part of this journey.  This team may change over time too, as new strategies are explored and new subject matter experts are identified.  

Some journeys in life require patience, humility and reflection. Define your ideal scenario, and start working backwards from the timeline you have established. Anticipate there will be some hurdles to climb, but in the end, it will be worth it.