The Importance of Assembling the Right Exit Team for Your Business

Exiting a business is a complex process that requires meticulous planning and execution. While many entrepreneurs focus on building their businesses, it’s equally crucial to have a well-defined exit strategy in place. A cornerstone of this strategy is assembling the right exit team.

Research conducted by the Exit Planning Institute reveals that a staggering 85% of failed exits can be attributed to the team, or lack thereof. As the business owner, you’ve invested countless hours and resources into building your enterprise. Don’t jeopardize your hard work by neglecting the final critical step: constructing a team of experts to guide you to the finish line.

When deciding on the advisors you need to support your transaction, the first step is to determine your exit option. Generally, those exiting a business will require four primary types of advisors:

1. Exit Execution: This will be a business broker, investment banker, or ESOP specialist, depending on your chosen exit path.
2. Legal: Legal representation is indispensable for all exit options.
3. CPA/Tax Attorney: An accountant is essential for all exit options.
4. Wealth Manager: A wealth manager is highly recommended for all exit options.

Exit Execution

The choice between a business broker, investment banker, or ESOP specialist depends on your exit option and business size. This individual or firm acts as the quarterback of the deal, coordinating all parties involved, including legal and tax representatives. To successfully close the deal and “sell” the business, the exit execution representative must prepare the business for the process, identify qualified buyers, negotiate favorable terms, conduct due diligence, and manage the pre-closing process.

• Read this article, provided by our Transworld partners, to learn how the right business broker can help accelerate your deal.

Legal

Your legal team is responsible for negotiating, drafting, and finalizing all legal aspects of your business exit. Proper legal representation is critical in this process. In general, your legal counsel will handle the LOI (letter of intent), final purchase contract, bill of sale, closing statements, asset ownership transfers, and escrow and funds transfer. Additionally, your legal team will address any supplementary agreements, such as non-compete clauses, confidentiality agreements, or extended working relationships.

Tax Professional

Your tax team may include an accountant, bookkeeper, or CFO. This team should be involved from the outset, as proper accounting and bookkeeping are essential for establishing your business’s value. A skilled tax team can differentiate between a sellable and an unsellable company. Once the deal is in motion, your tax professionals will help you understand the tax implications of the sale. Their responsibilities typically include preparing books and records for sale, ensuring financial reporting continuity during the sale, advising on deal structure for tax optimization, and filing proper returns post-sale.

Wealth Manager

The final member of your team is your wealth manager or financial planner. A skilled professional in this role can potentially save you significant amounts on your tax bill and help preserve your income and wealth for years to come. Generally, the wealth manager’s responsibilities include establishing personal goals, tax mitigation strategies, and income and wealth preservation.

Conclusion

Assembling a team of experts to guide you through every aspect of the exit process is pivotal for a successful business exit. From legal representation and tax planning to financial advice and deal execution, a well-rounded team can help you navigate the complexities and maximize your returns. By investing in a skilled exit team, you’re investing in the success of your business’s future.