AUSTIN HARRIS: FINANCIAL FOCUS: How will you exit your business?

If you own a business, you’ve always got a lot on your mind. But no matter how busy you are today, you need to think about tomorrow. Specifically, you’ll want to create an exit strategy for the day you want to move on from your business to a new phase in your life.

To develop this strategy, you’ll need to address these key questions:

• How much do you need (or want) for your business? Ideally, you’ll want the sale of your business to meet your retirement and estate-planning goals. So, you’ll need to think carefully about these goals and what costs they may entail. And these issues aren’t just financial — for example, when you think about how you may want to spend your time in retirement, you might realize that you don’t really want to exit your business completely. So, you might decide to sell just part of it, or sell it entirely, but stay on to help manage it or possibly do some consulting for the new owners.

• How much is your business worth? You may want to calculate your business’ value three to five years before your planned exit. You could do this on your own, but it’s typically advantageous to use professional valuation services. If you’re gifting or selling your business to family members, selling it to an employee stock ownership plan (ESOP) or settling an estate, you’ll need to get a more formal qualified appraisal to meet IRS standards.

• How can you close the gap between what you need and what your business is worth? The amount you need from the sale of your business to support your retirement goals may be more than what your business is actually worth. To help close this gap, you could try to boost your business’s profits through the usual means, such as introducing new products, raising prices or cutting costs. But you might also try to lower the amount you need from the sale by working longer, reducing your personal spending and saving more outside the business.

• Who will take over your business? When planning for a successor for your business, you have several choices, including selling to a family member or an outside buyer. Going public or liquidating the business are also options. These are distinct paths, but depending on your circumstances, one might be more appropriate for you than another. To cite just one factor, if you don’t have an obvious choice for a family member to take over the business, you might have to consider other buyers. In any case, you’ll need to explore all the economic and personal factors involved in the choice of successor.

• Who can help you with your exit strategy? Exiting a business can be complex. To ensure you’re making the right moves for your overall financial and family situations, you may want to build an exit strategy team, possibly consisting of your financial, legal and tax advisors. You may also need to enlist the services of a commercial banker and a business evaluation expert. Each of these professionals can bring a different area of expertise to your exit decisions, and together they can help address all the issues related to your exit strategy.

Exiting your business will take a lot of planning and decisions — but if it’s done right, it can be worth the effort.

Austin Harris is a financial advisor at Edward Jones on Dearing Street in Covington. He can be reached via email at austin.harris@edwardjones.com.