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Is it time to sell your business: Finally, the answer to the million-dollar question is…

Robert Wermuth, CLU®, ChFC®, AIF® | March 8, 2021

Planning to transition your business can often feel like writing the final chapter in your career. And while it will normally introduce a lot of new questions, understanding the right ones to ask NOW can mean the difference between your story being a fairy tale or a cautionary tale.  I outline some of the most common ones in this new article.

Getting the Right Price Is Only Part of the Answer

The year 2020 has likely taught us more “life lessons” than we ever could have imagined. In fact, the year most of us would prefer to forget has caused many to start thinking if now (or some point in the near future) is the right time to sell their business.

But getting the right price for your business is often only part of the answer. The rest however, becomes clear once you’ve answered a few other questions…

However answers such as these are not in an Excel spreadsheet, instead they lie in understanding three major factors: 

1. Yours and your family’s objectives (lifestyle, stimulation, financial, etc): Is your family in agreement with what will be a major lifestyle change? 

2. Your personal status: What is your health and marital status? Are you still responsible for dependents? What about lifestyle costs, savings, assets vs. liabilities, real estate holdings Are estate and long-term care plans in place? Do you need a will, trusts? How about intergenerational planning and philanthropic giving?

3. Your business affairs: Can you create the necessary cash flow? Are your business affairs in order? What about tax planning, corporate structure, partnership agreements, customer relationships, cash flow, risk analysis?

What Do You Want?

Many of us want to “stay in the game“ a bit longer (playing golf each day can get boring except if you’re really good at it). Running a business can be fun and exciting. It can give one a sense of purpose but for how much longer do you want to continue running the race? Is it all about the money or is the money a means to something else like living the life you’ve always imagined? Will what you can harvest from selling your business enable you to graduate to that elusive next level?

Other Considerations

Once you decide to exit the fast lane what will happen to the business, employees, customers and other relationships you’ve developed? What if you’re forced to suddenly exit due to an illness or accident? Can your family or a partner navigate a successful transition? How do you ensure that the business is sold for its full value or competently managed? How will the personal and professional sides of your life be handled? A formal but flexible transition plan can protect the value of what you have built while ensuring that you and those you care about comfortably move into their next life phase.

Time to Innovate

Deciding whether you want to transition your life and business today or within the next five years will help determine your plan. Other factors to consider are: 

  • How will you prepare for a transition to family members or to an outside party? 
  • When should you start to plan in earnest? 
  • Will after-tax proceeds be sufficient to maintain your lifestyle? 
  • What is the best tax-minimization strategy to protect your wealth and estate? 
  • Are your books and records ready for third-party scrutiny? If not, how do you plan to prove your business’s value? 

The answer to each of these questions is in the power to innovate.

During your career you were likely forced to innovate numerous times. (It’s very likely that 2020 forced you to innovate in some shape or form.) Estate- and post-sale planning has also evolved to now commonly include a “deep dive” into your objectives, history and business affairs to formulate a plan designed to protect the value of your business for you and your family. Legacy Planning can innovate so you can see your plan “in motion” modeling outcomes based on the various objectives, risks, history and multiple business-succession options available. Rest assured that the path you choose will become much clearer once you understand the various choices and begin to make it a reality.

The events of 2020 have given many of us a fresh perspective. At Legacy Planning we understand the unique advisory needs of business owners, private equity partners and high-net worth families and provide advice on pre- and post-sale transition planning tailored to meet your goals no matter the challenge.

WE DO MORE at Legacy Planning.  

Contact our office if you would like us to do more for you.  

610-719-8600  www.legacy-online.com

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Rob Wermuth is a senior partner with Legacy Planning who combines nearly 30 years of financial services experience with cutting-edge technology to deliver to his clients integrated solutions to simplify their complex financial reality. He specializes in documenting goals and developing strategies for significant life events, including: corporate succession planning, estate planning and establishing or managing a family foundation.

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