Many business owners reach retirement age only to find they don’t have a viable exit plan. Avoid falling into that trap by getting your company ready for sale now.
Owning a business involves everything. The money stops at your doorstep. On the same subject : Politics Report: People asked for the time and now they have the time because what they really wanted was time. It often feels like no one cares as much or works as hard as you do. And it’s easy to get caught up in my false thinking, “If I don’t do it, it never will.”
That’s why traveling when it’s time can feel like a day. Like selling a beloved home or seeing your children go to college. For some owners, this means passing the company on to the next family generation, while for others it will involve selling to a third party. And spoiler alert: There’s nothing I can recommend that will completely remove the tension of saying goodbye to a business you’ve poured your heart and soul into for years.
However, the good news is that there are ways to manage the financial issues, especially if you are planning to sell and therefore need to find a buyer. This is something that many owners leave until they want to move aside, therefore, they can often find themselves locked in a covered cage. After all, it is normal for the process of finding the right buyer to take three, four or even five years. Which means no matter how valuable your business is, the amount of time between deciding you want to exit and actually doing so can be a frustratingly long time.
Here are three ways to get ahead of the game now and manage your exit on your terms:
1. Set your timeline well in advance
Instead of waiting until you’re down, the time to decide how and when you want to sell your business is when you’re at the top of your game. This may interest you : JUL-AUG 2022 – Music – The Brooklyn Rail. For most owners, this means somewhere around the early 50s, well before retirement age but with enough experience to get the plan right.
Having this clear timeline in place helps create a sense of structure and process for the sale itself and how you are currently moving the company towards it.
2. Identify the who
Of course, the biggest part of preparing your business for sale is finding someone to sell to. As discussed earlier, this is a process that can take several years and should include carefully evaluating potential buyers to see if their values, goals and ideas for business operations and culture align with yours. On the same subject : My favorite video games, like Pokémon Legends: Arceus, make me run away. This way, you can make sure that the company continues to flow in your image even after you leave. (This is equally relevant if you are giving a stick to a loved one as well).
3. Be smart about the how
Once you have identified your buyer, the biggest question you will have to answer is how to finance the purchase. Another option here is that your buyer has enough money or bank funds to buy your business outright – which is great! Another is that they do not have enough capital (either owned or borrowed) to finance the transaction in another transaction. So instead, you complete an installment sale where you allow the buyer to pay you over a longer period of time.
Or you can choose a third tax-efficient option: the hybrid. Here you set up a tax-free Whole Life Insurance policy that you add money to regularly over the years between finding your buyer and completing your exit. At the point of sale, you then invest this fund into the business (giving you an additional cost) before passing the bonus on to the buyer as a salary. They then use the money to help finance the purchase of the company, which in turn makes them “creditors” for the rest of the loans they need. Unlike the first two options, this hybrid method does not allow you to benefit from many tax breaks. So, make sure you talk to a professional financial advisor who can help you plan it properly.
Whatever route you intend to take, whatever the value of your business and whenever you intend to exit, these three steps can help you do so in a way that will ensure a good financial outcome for you and your family. front.
In addition, it can even reduce the stress of traveling by giving you more time to plan and think. So, when the time comes, it will feel like less of a shock and a more exciting transition to a more relaxed and comfortable life after owning a business. To be honest, you will find it!
This article was written and presents the opinions of our contributing advisor, not the Kiplinger editorial staff. You can check advisor records with the SEC or with FINRA.
Stephen B. Dunbar III, JD, CLU
Director of Diversity & Joining, Senior VP, Equity Advisors
Stephen Dunbar, Equitable’s Senior Vice President, has built a successful financial services business that empowers others to make decisions and take control of their future. He and his team advise over $3B in AUM and $1.5B in coverage. As DEI’s National Director for Equality, Stephen works as an agent of change for the organization, creating a culture of diversity and inclusion. He earned a BA in finance from Rutgers and a JD from Stanford.
