“By failing to prepare, you are preparing to fail.” ~Benjamin Franklin
There are so many reasons why business owners aren’t planning for their own exits. During our recent webinar, we discussed some of the most common:
- Have to regain business value lost during crisis
- No time for planning
- Fear of conflict
- Complicated family dynamics
- Not sure what they’ll do in the future
- Employees can’t handle the business
- Co-owners not in alignment
We understand that you’re probably focused on day-to-day challenges right now and it may feel like it’s just too overwhelming to even think about your eventual exit. But starting your exit plan well in advance of your departure will actually enable you to gain control over the process and address these concerns.
Not preparing yourself and your business is risky. It can jeopardize the future of your company, as well as the financial security of you and your family.
Let’s look at 3 of the top 5 consequences of NOT planning for your exit in advance
- Not Being Able to Afford to Sell Your Business and Retire:
Most business owners don’t realize just how much money they will need to net from their sale to accomplish their financial goals. You need to be able to answer these important questions well in advance of your exit:
- Will I be financially able to live out my years in comfort?
- Will I be able to do the things I have dreamed of doing?
- What if I don’t net enough from the sale of my business?
Unfortunately, most owners don’t ask these questions until it’s too late. Taxes and fees can dramatically reduce your net proceeds. Fortunately, there are ways to minimize the tax burden, but you have to plan in advance.
- Limited Exit Planning Options:
Last-minute transitions driven by burn-out or untimely events such as disability, illness, or death can be devastating to your business value and severely limit your exit options.
Owners who do not have a contingency or succession plan run the risk that their businesses will not be able to continue without them. This can place everyone dependent on the business for their livelihood in great peril.
- Not Being Able to Keep the Family in the Business:
Countless family businesses have fallen apart or had to be sold due to a lack of planning.
Most family business owners just assume their businesses will simply pass from one generation to the next and continue without any planning or forethought. The reality is that less than 30% of family businesses experience a successful transfer from the first generation to the second and less than 10% from the second to third generation.
Family dynamics often create challenges and concerns not present in other businesses. A lack of planning can result in ill-prepared successors and strained relationships between those who are and those who are not involved in the day-to-day operations of the business. Your family harmony, legacy, and financial future depend on making sound business decisions.
Stay tuned for Part 2 of the Top 5 Consequences of Not Being Prepared to Sell!