Many business owners don't have company-sponsored pension plans and, consequently, have most of their money tied up in the business. For owners facing this situation, now is the time to start developing an exit strategy. An exit strategy involves developing a plan for passing on responsibility for running the company, transferring ownership, and extracting the owner's money. Developing an effective exit strategy involves planning on several levels. Because a stable business is worth more than an unstable one, creating a seamless transition is essential to maximize the owner's investment.
Transition requires planning ahead while the company is in good economic health.
The first step for creating an exit strategy involves assessing your needs. If not, you may want to consider selling your business to maximize value and avoid a crisis. If you don't have the liquidity necessary to cover your estate tax liabilities, consider buying life insurance or creating a gifting program. Disagreements with other shareholders or changing market conditions that increase risk may dictate the type of plan you feel most comfortable with. The cornerstone to any exit strategy is knowing what your business is worth.