3 “Unknowns” Limiting the Potential Success of Your Exit Strategy

You have more exit channels than you may realize.

Exiting the bus industry is not a one size fits all proposition. You have options. You need to carefully consider your exit goals and determine which exit channel addresses those goals most completely. Possible exit channels include:

  • Outright sale
  • Partner buyout
  • Gifting the business to a family member.
  • Employee Stock Ownership Plan (ESOP)
  • Recapitalization: Selling partial stock to an investor(s).

Your desired timeline for exiting is not likely in alignment with optimal conditions.

If your exit strategy timeline is arbitrarily based on you reaching a certain age, you are setting yourself up for disappointment and significant loss of personal wealth. Exiting on top requires an opportunistic approach that adapts to the available market conditions. Some common factors that have significant influence on exit strategy outcomes in the bus industry include:

  • Interest rates: A .25% – .5% increase in interest rates can have significant influence on a buyer’s ability to obtain third party financing and to cash flow the deal.
  • Access to capital for funding deals specifically in the bus industry.
  • Cost of fuel, government regulations, and a growing supply of bus companies for sale.
  • A strategic buyer’s immediate need to purchase your business and willingness to pay a premium price.

 

You have more options to minimize the tax implications of a sale than you probably realize.

  • Establish a baseline with a valuation combined with a tax breakdown. Set up goals to minimize potential tax implications.
  • Get outside expertise early. Creative tax solutions often take time to implement. Don’t be lazy and pay the government more than you are legally required.
  • Don’t assume a stock purchase is your solution or even a tax strategy at all. Many owners tell me, “my accountant told me I need to make sure this is a stock sale…..so, please make that happen, Spencer”. What their accountant often fails to tell them is that an educated buyer is not going to give a seller both a premium price and premium tax benefits. It is usually one or the other.

Exiting the bus industry is no joke.  Make sure you approach exit planning with the appropriate amount of respect and consideration so none of your hard-earned money is unnecessarily left on the table.

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