Exit Planning to Increase Your Business Value and Decrease Your Tax Bill
Proper exit planning can not only save you tremendously on your tax bill, but it can also help increase the enterprise value of your business.
Most business owners only look at exit planning when they have already decided to sell – sometimes after they’ve already engaged with a buyer. This is usually a mistake and leaves a significant amount of money on the table.
If you’re in a situation where you need to sell quickly or the sale is already imminent, then of course we will still help you to plan and to structure the exit in the most tax-efficient way possible. There are a number of different options available to help reduce your tax burden and help you keep as much of sale proceeds as possible vs. handing it over to the IRS.
But whenever possible, exit planning should be viewed as a process rather than an event.
Micah Fraim is a Certified Exit Planning Advisor (CEPA). CEPAs work with business owners to identify and reduce risk factors within the business, increase its attractiveness for sale, minimize the tax burden on the sale, and help business owners to plan for their next steps after they exit.
Most Business Owners are Unprepared for An Exit
The Exit Planning Institute released an update to their State of Owner Readiness Survey in 2023, with some pretty fascinating statistics. Among business owners:
- 75% would like to exit their business in the next 10 years
- 34% have a formal advisory team in place
- 41% had a written plan in place for what to do after they exited
- 68% had sought outside advice on their exit
- 70% felt they understood all of their exit options
- 75% profoundly regret selling their company within just one year after selling it
(As worrying as some of those figures are, they still represent significant improvements from the original 2013 survey. In 2013, 83% did not have a formal exit plan, 34% understood all of their exit options, 79% had no written plan in place, etc. This shows the increased importance business owners are placing on exit planning and the value it can provide to them.)
Exit planning is good business strategy. Starting your exit planning several years before you plan to sell can increase your business profitability, decrease your tax burden, and (sometimes significantly) increase the ultimate sale price of your business.
