There are many factors that contribute to a successful exit from a business. Here are seven key...
Baby-Boomer Business Owners: Start Planning Now!
According to a recent report from RBC Wealth Management Services:
- 40% of business owners have an exit plan in place.
- 49% of owners do not have a will.
- 22% have not begun any wealth transfer planning efforts.
To be clear, these are very low numbers. This probably isn't news to advisors who work with business owners on a regular basis.
Why is this an issue?
Not having a transition plan can cause numerous problems for a business and its owners. It leaves those involved in the company vulnerable, including family, employees, and customers.
The complicated discussions around wealth planning, transition planning, and succession can be difficult because, inevitably, they're tied to tough conversations about an owner's own mortality. It also brings up other nebulous questions about planning for an owner's financial future and the fundamental issue of who they will be when they are no longer the owner of their business.
We get it…
- You're busy running your business – You've dedicated the majority of your wealth and time to your business. Planning for retirement or an emergency situation has taken the back burner because you're consumed with the day-to-day operations of the business. And maybe you're thinking, it will all work itself out in the end.
Probably not a good plan.
- It's too time consuming – You feel like this is time you don't have because you're in the thick of running the day-to-day operations of your business. Transition planning does take time. It is likely that this process will take at least several months and possibly a year or more. But isn't it worth it to help facilitate the best outcome for you and your life's work?
- It seems too final – Planning for the next phase of life or for an unexpected death can seem morbid. Few people want to think about their own mortality.
None of us know what tomorrow will bring which is why planning for what you leave behind is so important.
We've heard all of these reasons numerous times. And we understand that eventually stepping away from your business can be a difficult and emotional time, but it doesn't need to be!
Here are just some of the benefits of exit planning:
- Gives you peace of mind – Developing an ownership transition plan provides you with the roadmap and timeline you need to achieve your personal life goals. You can move toward exciting new things in your life, knowing that you have done all you can to ensure the future of your business and employees, while providing an opportunity for the next generation of leaders to step up to the plate.
- Uncovers how much you need – Transition planning can help you determine how much money you will need from the transfer of the business to maintain your lifestyle and move into the exciting next phase of life.
- Maximizes your wealth - Transition planning enables you to determine the best ways to tap into your business value and minimize taxes so that you keep more of your wealth, and achieve your financial goals.
Time goes quickly and planning in advance will allow you to positively impact the outcome. We urge owners to take action and schedule a time when they will set aside the daily distractions of their lives in order to plan for the most impactful transition of their lives.
Over the next couple of weeks, we'll be exploring the fears many business owners face as they begin to approach their business transition and strategies to overcome them in order to achieve a successful outcome.