Business Owners Need a Graceful Exit Strategy
May 21st, 2015 by Bunch & Brock
It’s easy to get caught up in the demanding pace of everyday life. Many of us don’t seriously consider making a plan for the future, for taking the necessary steps to protect what’s important to us.
Estate planning is complex, yet essential, and owners of businesses must deal with the same possibilities as individuals. Succession planning allows small-, medium- and large-sized businesses to prepare for the inevitable by combining corporate law solutions with estate planning solutions.
With the youngest members of the baby boom generation set to turn 65 years old by 2029 (with the result that 20 percent of the total U.S. population will be over age 65), this demographic shift is poised to produce a Boomer-induced wave of business sales.
With small business ownership now viewed by many Boomers as more safe and secure than working for a large company, a large number of these 12 million businesses may be involved in Boomer-to-Boomer sales.
Finding a Buyer?
The biggest concern is that those who plan to sell or close their businesses over the next 10 years as a means to fund retirement may be in for a rude awakening. According to a recent survey of almost 200 advisors, 78 percent of small-business-owner clients plan to sell and they expect the proceeds to fund 60 percent to 100 percent of their retirement needs. More than 90 percent of the financial planners surveyed said that they have discussed developing a succession plan with clients, yet less than 30 percent of clients actually have a written succession plan.
Selling and marketing a small business is extremely difficult, especially because many are organized more like a job than an investment. This makes it nearly impossible to determine value. Another problem can arise if there are no family members or insiders interested in taking it over. The survey reported that the only thing as hard for small-business owners as emotionally letting go (33 percent) is actually finding a buyer (28 percent).
Safeguarding Your Investment
Making a succession plan for a business protects it against the financial risk of what would happen in the event of the owner’s disability or premature death. Without an exit strategy, the business would be subject to liquidation at fire-sale prices or possibly be dissolved, thereby leaving the owner’s family with little or nothing. You’ve put your heart, soul and resources into building your business. It’s just as important to achieve the best transaction possible when it’s time to exit.
As a business succession planning law firm with more than three decades of experience in the state of Kentucky, we have acted as trusted advisors to countless business owners and helped them prepare for the inevitable. To learn more, call Bunch & Brock at 859-254-5522. You can also fill out this online form.