The Exit Planning Process For Business Owners Simplified
July 1, 2017Is Your Business Sexy? Assessing Its Value for the Owner’s Retirement
When it comes to owning your own business, there are many perks to keep you going for years. However, at some juncture, every business reaches a stage where the owner needs to plan for the next stage of their life and the life of the business. In the world of financial planning, we call that Exit Planning. According to the Exit Planning Institute, the average business owner has around 80% of their net worth tied up in the business. If retirement is part of their life plan, then they’ll need that 80% to live off of. So how do you make those plans and get everything you want out of your business? Here are some things to think about as you formulate your exit strategy.
Getting Out
Whether your plan involves selling, handing down or going out of business altogether, you need a strategy in place to get the most out of your business. In the next ten years, 3 out of 4 business will change hands. The reason for that is that many baby boomers own businesses right now. Next, for them is the retirement phase of life. So essentially what’s going to happen is a lot those are going to sell, go to family members, or just go away altogether. Here’s the scary part only 25% of business owners are doing any financial planning. What’s even scarier, 75% of owners have no exit plan in place at all. In other words, most people view exit planning as coming to the point where you just try to find a seller, and that’s not the case. Taking the approach of finding a seller at the last minute will inevitably cost you. You won’t get what your business is worth. You will end up with below market values for your business.
That’s why strategizing is so important. Look at your business. Is your business sexy, i.e. attractive to future owners/buyers? Knowing that at least 80% of companies valued below $50 million never sell. That’s a ton of assets tied up in a business where an owner thinks they’re going to retire and have the same lifestyle because of some imaginary number they’ve valued their business at. That’s the bad news.
Getting Help
Here’s the good news. There is an army of Certified Exit Planning Advisors (CEPA) across the country (some 600 CEPA’s and growing) that are ready to help clients build their primary asset (the business) and liquidate this asset for retirement or transition it to the next generation. Most CPA’s, attorneys or financial type advisers aren’t there to maximize a business’s value. These professions aren’t generally trained to help you make the necessary plans that will garner you the most out of your most valuable asset.
That’s where I want to help. I have started and sold three business. As a business owner and CEPA, I’m here to guide you into the next phase of life. I understand what it is like to feel your identity is wrapped up in your business. I know what business owner think and how they feel. When looking at all the players involved in a transition or acquisition, it can be daunting. You can have CPAs, Financial Advisors, Attorneys, Merger and Acquisitions, Insurance agents. The list goes on and on. Most business owners, around 75%, don’t know all the options available to them when it comes to selling their business.
As a CFP® and a CEPA let me help. If you’re 10-15 years our from selling your business, now is the time to start planning. Work together with a CEPA to make your business sexy and position it for a transition that will garner you the most profit.