As discussed in the previous issue of The Exit Planning Review™, it is important to select your successor early in the Exit Planning Process. One of the great advantages of having other owners in your business is that they can be your means for retirement. Especially with smaller businesses, a common Exit Planning technique is to have a younger individual buy into your business while you are still active. Upon your exit, the younger owner will purchase your remaining stock.
This can be advantageous because the younger person learns the business — its structure, employees, customers, operation and management — while you are still active in the business. More important to you, the younger person’s capabilities (as well as his or her weaknesses) are known to you, so you have a pretty good idea of how your business will be run after you leave. And most important of all, the business can be sold to a market you create and control.
The following are additional advantages to selling your business to other owners or employees, as well as the disadvantages of this type of exit path. Take time to compare the advantages and disadvantages of this scenario before picking your target successor.
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