For many business owners, the idea of selling their companies for top dollar or passing them down to future generations is a retirement dream. Many entrepreneurs, however, are not doing the work necessary to turn this dream into a reality. Studies show that 50% of business owners plan to leave their businesses in the next decade. However, fewer than 30% have a business succession plan. Nearly one-third of U.S. businesses survive to the second generation — and only 13% are successfully passed down to the third generation.
What’s Your Retirement Timeline?
No matter how long you want to work and how much you love your business, a clear exit strategy is necessary to help foster the company’s longevity and preserve your financial health. If you want to be able to retire when and how you would like—and have your business last beyond your career — you need an exit strategy for accomplishing that goal.
One-third of business owners plan on their retirement to begin sometime between their mid-fifties and mid-sixties.
There are 3 steps you’ll need to take for a successful exit strategy.
1. Define your ideal exit strategy.
Do you want to sell your business outright? Pass it to the next generation? Find an outside successor? Sell to your employees? Compare your options and decide when you want to sell.
2. Determine the real value of your business.
Hire a qualified professional to provide a clear valuation of your company as it is today. Depending on how far you are from retirement or exiting, you might need to revisit this valuation in the future.
3. Create a strategy—and stick to it.
Your exit strategy might require you to hire new people, adjust your services, or implement a number of other changes. Consider locating an advisor that can help you prepare your business for its new owner and maximize your after tax sale proceeds.
Hiring outside help not only gives you access to professionals who can apply their experience to your specific needs, but it can also save you significant time and energy. Consider putting together an advisory board made up of your financial advisor, banker, CPA, attorney, and an industry peer to begin defining your exit strategy. Your plan may include milestones and change across time. But, having an initial plan is significantly better than leaving the outcome to chance.
If you have put off planning your exit, the Peak Wealth Planning team can help put an advisory board together and start the process. Schedule a call to learn more today.
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About the Author
Peter Newman is a Chartered Financial Advisor (CFA) and president of Peak Wealth Planning. He works with individuals nationwide that have accumulated wealth through company stock, ESOP shares, real estate, or running a business. Peter applies his unique background to help clients achieve their specific goals and enjoy peace of mind.
Peak Wealth Planning provides concierge services to meet your wealth management needs. Services include: financial planning, investment management, esop diversification, retirement income, insurance, and estate planning advice. Peak Wealth Planning is a fee-only financial advisor based in Champaign, Illinois, and Fraser, Colorado.