Business Exit Readiness
Success is a Team Sport
Business Exit: How Ready Are You?
An important step in preparing to exit your business is to know your readiness – both mental and financial. The matrix below can help you understand your current position and gauge your readiness. We can help you assess your options and organize your planning so you can find the best choices for your needs.
Which Option is Your Best Fit?
Your mental readiness may highlight your preferred option; your financial readiness may dictate something different. Thoughtful, informed planning will give you needed perspective to make the right choices.
The Readiness & Reality Check: Mind the Value Gap?
Is your financial and mental readiness consistent with your spending goals? This step requires an accurate review of your personal assets and your business equity to ensure you’re on track.
Key Areas Often Overlooked:
• Failure to account for spending with “after-tax” dollars (money you can use)
• Failure to have a reasonable and objective business valuation
• Failure to understand which risks most impact your goals
“Perks” that are run through the business must be adjusted to after-tax dollars to know your true spending level. Long-range retirement planning also needs to account for inflation’s impact on your money, so you know how much investment risk and return is needed to fund your goals with safety.
In the example below, the owner has underestimated annual expenses by $133,000. In order to fund retirement spending, adjusting for taxes and inflation, over $10 million in equity is required from the business.
Significant Equity is Often Required from the Business
Buyer’s View and Risk of Return
I hate to use clichés but when they help clients to understand key concepts that can get lost in technical details – I’ll use em! No pain, no gain; no guts, no glory – are ways to describe the risk vs. return decision. Investors have choices in how to invest across a...
Business Succession Plan Considerations
Most small business owners think about the future of his or her business. Because “the business” is usually the primary wealth generator and a large portion of personal net worth, many estate planning issues interact with business succession planning. A business...
The Purpose of Your Buy-Sell Agreement
A Buy-Sell agreement (BSA) serves several key purposes for business owners. A well-articulated BSA creates a ready market and liquidity to a selling owner, and should establish price, terms, and financing for the transfer. In short it spells out a process so that all...