The term “exit plan” is a fashion word among those who advise owners of companies, especially those of the generation Baby Boomer. Business brokers, heritage advisors and other professionals have begun to include “output planning” in their marketing strategies. It is no accident: more than 5 million Baby Boomers (about 3 million by 2024) are planning to retire from their companies.
It is not surprising that, when a business broker elaborates an “exit plan”, it generally implies putting the company for sale for a third party. Instead, a lawyer will focus on the legal documents necessary for the transfer of the company’s assets to new owners. For its part, a accountant or financial advisor will analyze tax and inheritance issues, while an insurance corridor will offer products that reduce the risks of interruption or catastrophe.
All these aspects are important to successfully implement a plan, but each professional focuses on their specialty. It’s like when your shoulder hurts: you could go to a traumatologist, a neurologist, a clinician, a chiropractic or a kinesiologist. Each will address the problem from their perspective. All could relieve pain to some extent, but not everyone will treat the underlying cause.
Similarly, there are many professionals who claim to be experts in output planning. Each one contributes their area of experience, and what they call “output planning” usually revolves around that specialty.
However, a comprehensive output strategy not only covers the legal, fiscal and risk management aspects, but also examines the company’s operational issues, whose value and working to increase the value of our companies, is the main engine of the entire process together with achieving meet our personal goals.
Why do an output plan. Before writing the first document or dreaming of how to spend the money from a sale, the company must specify a transaction. This means finding a buyer willing to pay the price. That buyer could be a third, but it could also be an employee, a group of employees or family members.
Any third interested in acquiring a company will carry out a thorough audit (Due Diligence). Its willingness to pay a premium price will depend on the history of income growth, the stability of the margins and the consolidation of the systems and the company’s client portfolio. If the company has more than 20 employees, they will seek talent in supervision and management that can stay after sale.
Regardless of size, a company that is too dependent on the owner to generate income or make key decisions will be strongly discounted or even impossible to sell.
An output plan should consider these factors, between several and help make the necessary adjustments to maximize the value.
Selling employees or relatives is usually an attractive option, since it allows the owner to choose the withdrawal date, and the price is less relevant than financing conditions.
However, unless you are willing to accept a promissory note of much of the price and have full confidence that your successors will be able to keep payments over time, this type of plan (as the experience indicates) must begin at least three, and preferably five to eight years before the planned transition date.
What does an output planner. A successful output plan needs experience in legal, fiscal, risk and patrimonial aspects, but also requires a practical analysis of your company’s operational strengths.
Having a professional who manages the efforts of all involved and helps you maintain the course is an intelligent investment.
On average, the owner of an SME in Latam has almost 80% of its net assets tied to its company (a reality that remains in force in 2025). For that reason, the most important financial transaction of your life deserves special attention.
*Gustavo Schutt is a specialized consultant in Exit Planning and author of “The reinvention of the owner”
By Gustavo Schutt
