Transfer of ownership interests to employees is another viable option. Such transfers may be accomplished through the establishment of an employee stock ownership plan, which provides for transfers over this time with significant tax advantages or through a management buyout.
Finally, the sale of an interest to third parties may be a viable alternative. In evaluating the range of values for purposes of negotiating a sale, the owner should assess synergies with potential acquirers as well as potential earnings growth after the sale because these factors will make the business a more attractive acquisition candidate.
Bob Walton's delayed business exit story is a frequent scenario for business owners that do not take the time to put an exit plan in motion well in advance of the desired exit date. Only by understanding the true value of an enterprise can a business owner make appropriate long-term plans for it. A constant, objective sense of the value of the business combined with the development of an exit plan in the early stages of company ownership will help management make better decisions as they operate the business on a day-to-day basis and ensure a successful exit at the desired time.
Lewis O. Hall, CPA/ABV, is a managing shareholder of Keiter, a firm of accountants and advisors based in Glen Allen, Va. He has more than 30 years of experience in public accounting and provides valuation consulting services for estate planning and administration, sales, acquisitions and mergers. As a Certified Exit Planner (CExP), he applies his experience to create peace of mind and achievable goals for business owners that are planning ownership succession.
Christopher D. Hagen, CPA, is a CExP who assists his business owner clients with the transition out of their business. He works to ensure the business owner gets the maximum value for the business at the time of the transition while at the same time staying in control and reducing the risk inherent in any transition process.