Knowing when it’s time to pass the baton has two intertwined facets: financial and emotional.
Many say owning your own business is a lot like having a child. It takes a lot of personal nurturing and care. By the time we are moving toward retirement or any other kind of exit we are so heavily invested at a personal level that many of us experience a form of separation anxiety. This can be compounded by a number of factors. A few examples are:
- Do we have an identity separate from our role in our business?
- Do we really want those who succeed us to outperform us?
- Is the business financially sound?
- Will we be able to sustain our lifestyle on what we can get for it?
The Emotional Side
There are signs that tell us that we should begin seriously thinking about exiting. Among these are:
- How do we feel about going to work every day?
- Are family members asking for the opportunity to take the wheel?
- Are disagreements among family or partners becoming more common?
- Do you have a medical condition that is making it difficult to perform at your previous level?
- Have circumstances changed that threaten future viability?
- Are you increasingly tired?
- Is your self esteem tied too closely to your business?
Hopefully, you have not so deeply invested yourself in your business that separation will cause a level of trauma. Exit planning is like a will. We need to think about it and do it but many of us seem to never get around to it.
The thing to remember is you are not alone. There is life after your exit. You may have to plan for it but it can be done very successfully.
The Financial Side
Too often what people focus on is the selling price of their business. It’s as if they need “bragging rights”. While the sale price is important,
it is not what you get…it’s what you keep that is important.
As you approach this time in your life it is important that you make yourself aware of the various structures a sale can take that can be advantageous with respect to taxes and lifestyle. Assembling a “package” to offer prospective buyers is a necessary first step. The real first step, however, is to prepare a package for yourself. This should include:
- Deal structure scenarios
- After tax projections
- A draft contract which includes language referencing your role and its limits going forward.
- Non compete
Of course, Succession Planning Associates can help you with all of that. We can also guide you through the many personal, employee and intrafamily issues that this “once-in-a-lifetime” event will trigger.