Let me tell you about a business owner I met recently. This tenacious gentleman owned his business for over 30 years. Throughout that time, he made extremely clever and strategic moves to further his success.
- He bought his building and placed it in a separate LLC.
- He saved enough in his estate to comfortably retire.
- He protected his house in a trust.
- He purchased life and disability insurance.
- He met with a financial planner to annually evaluate investments.
These are high-level, proactive strategies and plans implemented by a very intelligent man. At no point could any of us accuse him of being shortsighted or not planning for the future. In many regards, he has planned and prepared for almost every aspect of his life.
Yet, when I asked him what his plan for his business exit was, he responded, “I don’t have anything in mind.”
I wish this surprised me. Honestly, I am yearning to be caught off guard when I hear this. Yet, after continually hearing the same ambiguity and, quite frankly, lack of interest on exit planning from successful business owners, I am no longer surprised.
This is normal.
It’s not limited to planning a business exit. Recently, I met with an estate attorney. He faced similar challenges with his clients regarding wills and trusts. He’s even had times when a client pays him to draft the trust but refuses to sign it. There seems to be the belief that by signing the trust they are bringing death closer.
News flash, everyone is going to die regardless of if they have a will or trust. Why not put a document together to outline your wishes and protect everything you have earned?
The same is true for your business. You will leave your business.
Leaving will either be voluntary, such as exiting, or involuntary, when you die at your desk. I know this is grim. You can’t sugarcoat the facts of life. You can be intentional about planning for life, though. Much like a will designing a roadmap and stating your intentions for your estate, a business exit plan will lay the foundation to protect the equity in the business and outline your goals for the future.
So here is the real question. Is your business worth investing the time to create a plan for the future?
What about your family? Are they worth the time to create a thought out approach on who will take over the business, how shares will be decided or how to distribute ownership? The challenges estates leave behind without a will are nothing compared to the trials that face families trying to address running a family business without a plan.
Unfortunately, most business owners don’t have any interest in planning their exit.
They are too busy. One of their children will take over. Someone will want to buy it. They aren’t exiting for five years, so it’s too soon to consider options today. While good in theory, none of these actions take place without a plan. Even five years will approach quicker than anticipated.
Much like signing a will doesn’t bring about your death, creating a business exit plan doesn’t mean you have to exit today.
An exit plan is designed around a conversation. Start by defining an exit “win.” What do you think you want to do with your business? What will that look like? This “win” is similar to all other investment conversations. You can cash out, turn it into an annuity, give it to a child, pass it to a key employee, or sell.
You get to define what a “win” looks like in your business.
Then you build the plan to achieve it. This strategy covers potential timing, how much money you want when you leave, how you want to be paid, and the mechanics of exiting. The timeline is not set in stone. You can even amend, drastically overhaul, or completely toss out your exit strategy next year. In fact, I recommend reviewing it annually to make sure it aligns with your goals.
What matters is that there is a roadmap in place. Which means you are protecting the business and your family.
If you’re ready to take the plunge into exit planning today, know you don’t have to go it alone. After outlining your goals, particularly how much money you want from the business, it can be daunting charting how you will achieve that.
That’s where I come in. I help successful business owners craft the terms of a successful exit strategy. Then we make it happen. Contact me today to set things in motion.
The larger the goal, the more time it will take. If you want to sell, it’s important to start taking steps three to five years in advance to implement value drivers. Family businesses can never start discussing succession planning too soon.