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Business Exit Strategy

 

Most people have taken care of preparing a will to protect your personal assets. But if you’re an owner of a business start up or a small business owner, have you prepared a will for your business? This is what business exit strategy and succession planning is all about. If you own a family business, retirement planning isn’t simply a matter of deciding not to go into the office anymore. You have some critical questions to answer such as, “what happens to the business when you’re no longer running it?” and “will you have enough money to retire?”

Succession planning should be a priority for any family business or business start up considering that more than 70 percent of family-owned businesses fail to survive the transition from founder to second generation. Most businesses concentrate on being successful but don’t focus on retirement planning and where they eventually want to be. Critical issues to address include when and how you want to exit from your business—your business exit strategy. Are you the type who always wants to be involved in your business or are you capable of stepping back and getting to enjoy your life?

Your Options for Your Business Exit Strategy

In exiting your business there are many options—pass the business on to your children or family, sell the business to your key employees, bring in an investor who will eventually buy you out, or sell the business to your partners or an independent third party.

Even before you get to that point, if there are partners involved, you should prepare a buy/sell agreement which would spell out what happens to the business if one of the partners becomes disabled or dies. You should also have a business valuation done (probably on an annual basis) and fund the buy-out with life insurance on each partners’ life. The business would own the policy and the spouses would be the beneficiary of the policies.

Succession planning should be formulated as a precaution against unforeseen, unintended and perhaps inevitable future events. Are you prepared? If you own a business start up or small family business, contact GBH Consulting today at 732-683-1170 to discuss your options for retirement planning and a business exit strategy.