Years ago you entered the world of restoration. You may have spent decades building a successful business. Are you prepared to exit?
Retirement may be sounding better every day. But the actual thought of selling, of navigating the process of exiting your business, can be frightening. To complicate the issue, you, like many owners, may have a significant portion of personal net worth tied up in your business. Make the wrong decision, or no decision, about exiting your business, and the consequences could range from costly to devastating.
In business terminology, an ending for a business owner is called an “exit.” Planning for that ending is called an “exit strategy.” If you have an exit strategy, you are in control of your business and your destiny. You are aware of and actively focusing on a goal.
An exit strategy indicates you have planned for a profitable and rewarding ending to the working chapter of your career. Most importantly, you will gain confidence and peace of mind knowing that you are not leaving your eventual exit and retirement to chance. Very few business decisions are more crucial.
Don't Jeopardize Your Retirement Through ProcrastinationWithout exception, business owners have spent countless sleepless nights worrying about their business, taken scores of calculated risks, and endured incalculable hours of “sweat equity” while they built their businesses and value. But finding the handful of hours necessary to preserve and protect those investments falls to the bottom of their priority lists.
After years of effort, many owners have created a business that is profitable and worth selling. If it’s worth selling, it’s worth protecting. Quality protection begins with asking a few questions, which will evolve into a well-developed strategy to protect your business, your wealth and your future.
With hundreds of thousands or even millions of dollars at stake, why do so many owners make decisions based on emotion? Emotion drives a number of your daily business decisions, but it has virtually no place in the critical decisions surrounding an exit strategy. Why not introduce some cold hard facts, making your decisions black and white?
Ask the Critical QuestionsWhat do you need to know? Here is a checklist of essential questions to ask:
- Are you emotionally and financially ready to retire?
- Have you prepared the business for sale?
- Would you consider working in the business, not as an owner?
- What are your retirement plans? Or do you have any?
- Do you know what your business is worth?
- What is driving the value of the business?
- What can a buyer, investor or lender justify for a price?
- Does that sales price result in satisfactory financial yield for retirement?
- Are there ways to make it more valuable in the short-term, or make it more appealing to a buyer?
- How much will I have to pay the IRS at closing?
- How about in the future?
- Are there any preventive measures I can use to delay or minimize my taxes? If so, what are they?
- How do I preserve as much wealth as possible for the next 15-30 years?
- What wealth preservation strategies exist so my investments grow tax-free?
- Are they right for me?
- If I’m trying to sell or transfer the business to a family member, are there gifting strategies that eliminate or minimize taxes?
- How would a deal be structured for a family member?
- What is the best way to get paid?
- How long does it take to sell a business like mine?
- How long would I be expected to train or consult with a new buyer?
- Who are the best buyers?
- When marketing a business for sale, how is it kept confidential?
- How do we market it so competitors don’t find out?
- How is a business advertised?
- How are buyers recruited?
- How do I protect my key people who have helped over the years and ensure they have jobs after the sale?
Ask a handful of these questions to a broker or intermediary. He or she can provide guidance through this process. Nothing is gained until the questions are asked.
More importantly, be prepared to take an honest look at the answers. It’s a process of straightforward questions and trusted answers. Solid decisions and peace of mind will be the result.
Ask the Key Questions at the Right TimeIdeally, these questions are asked 24 to 48 months prior to your desired retirement date. The more time allowed for preparation, the greater the ability and likelihood of success in preparing the business for sale, executing any wealth preservation tools and ultimately maximizing both the value of the business and resulting yield.
The reality is that most owners think about selling….think about selling….and think about selling. All the while, they are not asking questions and preparing for the sale. They are just thinking.
When the first questions are finally asked, owners are often tired and actually within inches of being at the end of their emotional rope. Sadly, they have very little remaining mental energy and they just want (or need) out. All too frequently, owners leave themselves very few options with a shortened timeline. It’s a fact. Condensed timelines limit options and needlessly cost sellers tens of thousands of dollars.
Protect Your Future Through Small DecisionsThrough education and learning the rules of the game in advance, you will find that the process unfolds as a series of small decisions, instead of one or two that are monumental. With this education, the road ahead will become clearly visible. This should significantly reduce or eliminate the prevalent attitude of many owners which is, “I hope everything will turn out.” Hoping things work out is just gambling with your future.
With a proper business valuation and some basic planning, you will ensure a smoother transition and quite possibly make the business more valuable. Qualified professionals can assess your needs, answer all of the above questions (and more) and assist in evaluating the options available to you. Ultimately, the goal is to maximize yield while minimizing risk, both financially and emotionally.
With a little preparation and education, the timing and eventual decision to exit doesn’t need to be a difficult one. With the stakes at an all time high, educated decisions are the best.