The Four D s of a Business Exit Strategy From Brent Dees, CFP, CSA . See More About: business exit strategy selling a business incorporation business valuation"Begin with the end in mind," says Stephen Covey in his book,"The Seven Habits o f Successful Living." Those who have created a successful business know it does not happen without planning, hard work, and a little luck. Yet most have no exit plan for leaving their business. The truth is that most business relationships do not have happy endings. To have a successful business, you must plan for all four D s of a business exit strategy. The idea that your business will provide you with income after you are no longer there may not be a reality. You have to depend on yourself. Take the time to lo ok at the four D s of a business exit strategy: death, disability, divorce, and de parting. To have a successful business, you must plan for all four D s. The Four D's of a Business Exit Death: The issue of the death of a small business owner should be considered dur ing the start-up of a business. Unfortunately, during the creation of many buy/s ell agreements the issue of death is only addressed at the urging of a life insu rance agent. At the meeting, you arbitrarily decide how much insurance you can a fford and how much your company is worth, when in fact you do not know. Disability: Death is not as likely to end the business relationship as disabilit y. Small business survival will often take prescient over paying a disabled part ner. If the person is important to the business, the financial strain impacts th e business and the family who depends on the income. Divorce: You can imagine the torn feelings if a disability occurs, but what if t he partners cannot get along? How do we split a partnership without financially ruining each other? It may be complicated by many personalities, some may not ev en be a part of the dispute, yet may be affected financially. Departure: You may all be happy working together, but your partner or you may de cide to leave for another opportunity or simply to take life easier. Who is goin g to do the work? What is owed the leaving partner? Where is the money coming fr om? All important considerations for your business exit strategy. A Fair Buy/Sell Agreement For the small business owner, each one of the four D s has special demands on: fam ily, income, taxes, and transfer of control of assets. An agreement, commonly called buy/sell agreements, can be used to handle the four D's. The concern of the family or income can conflict with the business. The business exists as a separ ate entity. Reduce conflict by developing mutual fair agreements and the desired level of income. Creating a Business Exit Strategy Once you understand the four D s, include the following actions in the creation of your business exit strategy: consider incorporating your small business to legally recognize yourself and your business as separate entities find a method of determining the value of the corporation that can be done at lea st annually and will qualify under IRS standards develop an employee benefit plan that will assist with the departure of each part ner in case of death, disability, or retirement plan for who retains company ownership and who gets paid off The great American dream is to: build a business of your own; bring it to life; and make it successful. How you plan your small business exit strategy will dete rmine your financial success. Just as building a successful business takes plann ing, hard work, and a little luck, so does leaving it.