Why Plan Now?
The risk of growing old, or infirmed, are not the only reasons that you should be thinking of planning to pass on your business. For example, perhaps your first love is starting a business, rather than business growth and management.
Your business value will increase if you are planning for its, and your own, future. By looking ahead to exit strategies you, and your advisors, can strategize a business retirement plan that makes sense now, and as well can be fine-tuned as your situation changes over the next few years.
We have not waded into all of the legal and accounting/tax implications of business succession, but have provided places to go for more information in the Succession Resources section.
For now, consider some of the operational, financial and strategic reasons to make a plan to exit your business:
- Protecting your investment and creating the full value of it;
- Generating a potential income stream for your retirement;
- Creating tax benefits that could impact your estate;
- Creating a minimum of disruption to business operations at your exit; and
- Permitting family members of key employees to take over ownership confidently.
Here are some questions to ask yourself about your business in the context of succession planning:
- If you are a corporation, do you have a shareholders' agreement or a buy-sell agreement?
- If you were selling your business today, how much do you think it is worth?
- When you retire, what do you think you will do with your business: give it as a gift to family, sell it to family, sell it to a stranger, sell it to your most trusted employee?
- What portion of your estate is tied up in your business?
- In the event of your premature death what would happen to your business?
- If you were to become disabled what would happen to your business?
The next page in this section will discuss the common exit strategies.