As a business owner, it is important to know the answers to a number of critical questions before selling your business. Some of these questions include:
- What is Succession Planning?
- What should Succession Planning embody?
- Is there a proven process I can follow to help me with this planning?
- How is this Succession Planning process going to help me transition from my business when I want, how I want and in a way that is energizing mentally and financially?
As we approach our next Business Exit Breakfast event, Eat Toast or Be Toast, many more topics about business succession plans come to mind. Another key question that we hear a lot from private business owners is “why do I need Succession Planning?” This is a fair question and an important one. Here are two reasons, among many, why Succession planning is critical to your future:
1. Your business is illiquid
This means that your business cannot easily be sold or exchanged for cash without a substantial loss in value. Unlike 100 shares of Apple stock in an investment account, you just can’t hit a “sell” button when it comes time to transition to your next phase in life and collect cash proceeds from the sale of your business the same day. It takes time, strategy, thought, and commitment to a process to maximize the value recognized from your business entity.
Making sure you’re harvesting the appropriate value from your business as an asset is much more difficult because of its illiquid nature.
2. Your business is your largest asset
Think about your balance sheet as a portfolio of assets. Contrary to the old adage “don’t keep all your eggs in one basket” most business owners do precisely that, and their business becomes their only basket. The risk you have taken with your business has paid off over time. When it comes time to fund the next phase of your life, you don’t have time for such risks. If you don’t plan well for this transition, a life’s worth of hard work, risk-taking and sacrifice could be lost.
It’s absolutely critical that the business asset is planned for accordingly to ensure that the exit plan serves the needs of the business owner and their family.
Join us at our next Free Business Exit Breakfast to learn more about why it is so important to start this process designed to help you live your best life as you exit your business on your own terms.
Authored By: N. Perry Moore, CBEC™, CFP®, MBA