Over the last several years, there has been a rise in “exit planning” services. For many business owners, this is planning for the sale of their business to insiders, family, or external buyers. Owners who have not yet decided to exit their business, or when to do so, may think that exit planning is not for them. Any planning normally should not start with the end solution (exiting, or selling, the business) decided. But, there are planning services that do make a lot of sense for a business owner at any stage in their life or the life of their business.
The first plan a business owner, or any other person, should have is a life plan. Most of us fall into a routine and just continue to live it out year after year. If you don’t know where you are going, any road will take you there. But, if you want to live a more satisfying life, then you need to think about what your goals are in all facets of your life, including your business or career, financial, educational, social, family, physical, and public service. These goals are not mutually exclusive; most involve deciding on your priorities and then allocating your time to the ones that are the most important. Your priorities are likely to change over the course of your life.
For a business owner who is thinking about selling their business and whose decision depends on whether the business will sell for enough money, there are two steps that need to be taken: First, the owner needs to get a business valuation – an estimate of what the business is likely to sell for. BayState Business Brokers can provide this service. The second step is a complete analysis of the business owner’s financial situation to determine how the business owner can have the income he or she needs and how to achieve it. A financial planner provides this service and we can refer you to financial planners who will provide this service. This analysis should include how much the business needs to sell for to achieve the goal. If how much the owner needs the business to sell for is in line with what the business is likely to sell for, then the business owner can afford to sell the business.
A business owner may decide to exit their business, but it should be done after giving consideration to their financial and other life goals. For some business owners, their business may give them so much satisfaction that they don’t want to sell even though they can afford to do so. On the other hand, other owners who want to do something else with their life and want to sell, even if it means lowering their standard of living, should do so. Planning should include figuring out what the business owner wants to do and how to achieve it. If the plan includes exiting the business, the plan should include what the owner is going to do with his, or her, life after the sale.