If you’re a business owner beginning to think about the future of your business and your role in it, then let me suggest that there is no time like the present to begin developing your exit strategy. A successful exit strategy is confirmation that your business has value independent of your leadership and management.

Though there are multiple factors that impact your ability to withdraw, one of the most important elements of a successful exit strategy is developing personal wealth independent of the business. You will not get serious about turning over business ownership and management to successors until you know you’re your personal financial security is not in doubt. If you are dependent upon business cash flow you will not aggressively embrace the risk associated with competition and growth. You will not empower family successors or key managers to assume leadership or make important operating decisions. If you’re transferring to family members, the transfer of management and leadership can become problematic as conflict and power struggles ensue. Successors become frustrated with being second-guessed and not having the opportunity to learn from their mistakes.

Hopefully, forethought and fundamental financial planning has put you in a position of financial independence apart from your business. If so, you can begin aggressively tackling other factors that impact your exit, such as the management and emotional ability to withdraw. If you are not financially independent apart from the business, you will need to begin by establishing your financial security goals, organizing your assets, evaluating your assets relative to your goals, and establishing a sound asset growth and management strategy. If your timetable permits (more than five years), initiate an aggressive financial planning program to accumulate sufficient wealth to provide as much independence from the business as you can. Utilize retirement plans, a personal investment portfolio, real estate, receivables, etc. Your goal is to get to a position of independence from ongoing business success.

My experience, however, suggests that while business owners spend extended time in business analysis and strategic planning for the business, they rarely follow the same process in establishing succession-related goals until retirement or death is imminent. If this is you and your timetable is short, say one to five years out, then you need to consider all the alternatives you can. In addition to the aggressive campaign above, your exit strategy will be contingent upon ongoing business success to support a salary and benefit continuation plan, rental income from business related real estate, or business dividends. Finally, you will need to consider what portion of your retirement funding will actually come from a sale of all or a portion of your business interests – either to a third party, your family successors, a key manager(s), or an ESOP. Each of these scenarios carries it’s own set of unique challenges in fulfilling your financial security needs. Otherwise, you will need to consider altering your retirement timetable and/or your desired standard of living.

Pragmatically utilizing earnings from the business to build personal independent wealth that subsequently empowers a business owner to implement a successful exit strategy builds business value.

Jeff Faulkner, MS, CSP is Certified Succession Planner and a principal with The Rawls Group, a firm that specializes in family business succession planning. Jeff is also a co-founder of the International Succession Planning Association. Jeff relies upon his dual background in financial planning and family counseling to navigate the unique challenges of family business succession planning. Jeff’s background has allowed him to gain specialized experience in working with families in achieving mutually satisfactory resolutions in succession planning issues. For additional information, contact him directly at 770-894-9056 or through The Rawls Group at 407-578-4455. www.rawlsgroup.com.