Business Continuation and Exit Plans for Business Owners
With any business, an exit plan or continuation strategy can make all the difference. We have to think past this year and make choices for the future, if we want to sell our business or if wantt our business to continue.
As a business owner, it’s easy to focus on keeping the company running smoothly today, and lose sight of what could happen to the business in the long term.
Unfortunately, many don’t even think about retiring or selling their business. After being self-employed for over 40 years, and in the financial services business for nearly 20 years, I understand the planning and strategizing that is required in either case.
And, even fewer business owners consider what could happen to their business in the event of their death or disability. Again, I’ve experienced these first hand, and neither are pleasant.
Business Owners Need To Do Financial Planning Too
We all like to think we’re invincible, but in reality, we’re all at risk. Statistics (1) show that 1 in 4 of us will become disabled before we retire, and the reason for disability is much different than what most people think.
When asking this question, what causes disabilities, accidents are the most frequent answer. However, illnesses make up 90% of the causes of disabilities, while accidents make up only 10% (2).
So, we have to plan for the unexpected as business owners. There are many disability insurance plans available to continue the operation of your business and provide income in the event of a disability.
Overhead Expense Disability Insurance helps your business continue paying everyday expenses like rent, utilities and payroll.
You may consider Business Loan Protection, which could help your business continue payments on business loans or equipment leases.
There’s also Disability Buy-Out protection. Whether you’re a sole proprietor or a partner in a business, disability raises important concerns to both you and the other parties involved.
Business Continuation
Let’s say you have a partner in your business, what is your exit plan? Perhaps you want to retire and your partner(s) want the business to continue.
The remaining owner(s), or even employees, may want to ensure the continued operation of the business. All involved will likely want to avoid conflicting interests from the other owner’s spouse or children.
This is why it’s important that you have a business continuation plan, should you or a partner want or need to move on. This is known as a buy-sell agreement.
Selling Your Business – Exit Stage Left
Are you a business owner considering the sale of your business or a possible retirement? For business owners hoping to sale or transition out of their business, a valuation is a good place to start.
Perhaps you’re planning now, or seeking greater liquidity, but are unsure how to move forward. A formal business succession plan is key in this process.
An exit strategy or sucession plan is essential to a business’s future. Yet, nearly half of growing businesses fail to consider an exit or succession plan.
Together with our financial professional team, we offer a variety of options to help you plan, and if necessary, fund a succession plan for your business. These plans can protect you, your family, and your business.
Business Strategies to Protect Your Future
None of us can predict the future, but we can plan. Changes in a company’s leadership and ownership often occur as a result of death or disability. We can help protect your family, and your lifestyle, by planning for these events.
Based on the information you provide we can create an informal valuation of your business using the most appropriate valuation methods. Going through this exercise will provide you with clarity and options for moving forward with your plan.
Business Valuation
Having an accurate business valuation can help you create a plan to protect:
- You and your family
- Your key employees and potential partners/owners
- The continued health and success of your business
A successful exit plan starts with a business valuation. This will help you understand where you are, so you can get to where you want to be, in the most efficient manner.
What makes your lifestyle possible?
- Business
- Income
Understanding the business numbers with an valuation creates a clear and effective way to ensure a safe transition of the owner’s interest in the business. This can ease the burden of all parties involved.
What’s involved in selling a business?
There are many factors involved in the successful sale of a business. Some of these include the business and good will, land, inventory, equipment, sales, profits and any employees.
Are you open to owner Financing?
As a business owner, you probably understand that financing and loans can be difficult to acquire. And, if income is your ultimate goal, owner financing should be a consideration.
Of course owner financing adds another element to the equation, but it often is the best solution. There are many methods to go about this, including options and buy out provisions. So, making sure you understand the agreement is paramount.
If you’d like to learn more about an exit strategy or continuation of your business, contact us for a review.
Your Business Advocate,
Barry Page
Barry Page is an Authorized Infinite Banking Practitioner, Managing General Agent, and Founder of Legacy Insurance Agency, PLLC. He helps clients with tax-advantaged investment alternatives, and specializes in showing families how to protect their assets, income and lives using a unique approach to financial planning.
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1 U.S. Social Security Administration Fact Sheet, December 2018
2 Council for Disability Awareness, Long-Term Disability Claims Review, 2014