Whether you realize it or not, you as a business owner already have some type of “transition plan” or “exit plan.” You may or may not have given much thought to this plan. You may or may not have written down any of the components of this plan. Parts of this exit plan might be scattered throughout various documents or actions which you have taken at various times over the course of your business life.
This exit plan might be partially reflected in a Will or a Trust which you executed several years ago. It might be partially reflected in the components of a life insurance or disability insurance policy which you established either through the company or on your own in the past. It might be reflected in some verbal statements that you’ve made to family members or to key employees or key advisors. Or, a large portion of your exit plan might be reflected in those steps which you haven’t taken.
Over the years we’ve dealt with a variety of these kinds of “exit plans”. We’ve done this either after the fact, once a business owner has died or become disabled or often a business owner has seen key employees picked off by other companies. Or we’ve reviewed the elements of the exit plan which the business owner had at the time we were engaged to create a more specific, comprehensive Transition Growth Plan.
What's In Your Plan?
We’ve given some names to 10 of these types of partial, informal exit plans. You should consider what type of exit plan you think you have in place today and which of the various exit strategies discussed in this Next Step System would provide you and your family with a better exit outcome in the future.
1. The “Wishes Are Horses” Exit Plan
As the old saying goes, “If wishes were horses, then beggars would ride.” This type of exit plan is by the owner who believes that wishes are actually horses and that a good exit outcome will occur just by wishing it to be so.
2. The “Uncle Sam” Exit Plan
Under this type of exit plan, which is highly favored by your Uncle Sam, your exit will result in the highest amount of tax obligations to federal and state governments on account of your decision not to implement tax-saving strategies.
3. The “Ostrich” Exit Plan
Under this exit plan, the business owner has decided to put the head in the sand by not proactively addressing issues and disputes which he or she knows will occur or need to be dealt with on account of his or her planned or unexpected exit.
4. The “Mulligan” Exit Plan
In a casual game of golf, the players can, of course, take a shot over, which is called a “mulligan.” This doesn’t work in professional golf. Likewise, it doesn’t work in Transition Growth Planning. For example, if you are disabled or die, without putting the proper strategies and funding in place to deal with your unexpected exit, you (or your family) don’t have the opportunity to do this over. Or, if you’ve lost the key employee who you thought was going to be your successor, because he or she grew tired of the uncertainty regarding your future plans, you don’t have the opportunity to go back.
5. The “Wait and See” Exit Plan
Under this type of exit plan, the business owner is forever and forever unwilling to make a decision about how to proceed. The paralysis that results from always wanting to “wait and see” how things turn out tomorrow before making a decision can be very detrimental. In Transition Growth Planning, we operate under the principle that “all plans are firm until changed.” This means that it’s generally best to establish a plan and then revise and adjust it as needed depending on what happens tomorrow.
6. The “Return to Sender” Exit Plan
In this type of exit plan, a lack of pre-sale planning results in a business owner selling the business to an incapable buyer for an installment note payable who ultimately defaults on the payments, resulting in the business being sent back to the seller, typically in a lesser condition, to attempt to exit from again.
7. The Exit Plan “In a Box”
This is an exit plan which a business owner has bought into from an advisor who has failed to tailor the particular objectives of the business owner to the particular circumstances of the business and the family by simply imposing a “cookie cutter” approach.
8. The “Deathbed” Exit Plan
This type of exit plan is literally developed on the business owner’s deathbed which, of course, is generally too late to implement sound decisions.
9. The “Iceberg” Exit Plan
This is perhaps the most common type of exit plan. Here the owner believes he or she has dealt with the steps needed to be prepared for a future exit, but has only envisioned the tip of the iceberg without realizing the depth of other matters that need to be dealt with. This is also known as the “Ignorance Is Bliss” Exit Plan.
10. The “Junk Drawer” Exit Plan
The junk drawer exit plan is the result of the uncoordinated actions of the business owner and his or her advisors over a period of time. It consists, for example, of a life insurance policy bought ten years ago, a buy-sell agreement executed fifteen years ago, a Will signed when the owner’s first child was born, scribbled notes in the owner’s desk attempting to start, and start again, to focus on the beginnings of an exit strategy, etc. This “plan” rarely works.
What Kind Of Exit Plan Do You Have?
The purpose of The Next Step For Business Owners is to help provide you a Roadmap for first of all recognizing and secondly avoiding each of the above types of exit plans. Using The Next Step For Business Owners Transition Growth System, you can design and implement your personal Transition Growth Plan which will be effective for achieving your personal, financial and legacy objectives.