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Why Planning to Sell Your Business is Always a Good Idea

  • 12 May 2015
  • Author: Cari Holbrook
  • Number of views: 2722
Why Planning to Sell Your Business is Always a Good Idea

One in three small business owners plan to fund their golden years by selling their businesses. However, half of these business owners do not have potential buyers lined up. These statistics from a 2014 Small Business Retirement Readiness Study shed light on a common issue among entrepreneurs: the issue of poor exit planning.

In order for your business to live on without you, you’ll need to plan ahead. Think of it this way: You’re going to “sell” your business at some point, whether you think about it in those terms or not.  A good advisor will tell you to run your business as if you plan on selling it, so that you and the business are both ready for whatever may come. Of course, the biggest decision to make is who would potentially buy the company? Could it be family members or your employees?  Here are some considerations:

What about employee stock ownership (ESOP)?

ESOP is, essentially, a trust fund for employees. According to the National Center for Employee Ownership, about two-thirds of ESOPs are used to provide a market for the shares of a departing owner of a profitable, closely held company. The organization cites studies that show ESOP companies grow faster. Plus, there are certain tax advantages for departing owners.

Do you want to keep it in the family?

Nothing can tear a family business apart faster than poor succession planning. A good exit plan will address this in as much detail as you need. Maybe one family member is a great hands-on manager. Another may be less active in the business but good with strategic direction. Plan for this and give these successors only the control they need to allow the business to continue to thrive.  You can review our previous Golden Handcuffs Series for specifics.

Is it too early to plan your exit?

When is it too early to create an exit plan? Never. As soon as you’re in business, you should be planning ahead to the next month, next year, next 10 years and onward. For more detail, refer back to our previous post: It Can Take 10 Years to Retire Right, and Here’s Why. And, for additional inspiration, read the story of Clytie Roberts-Glage and Rico Glage, owners of Café Berlin in Washington, D.C., in our recent client spotlight. These young, up-and-coming business owners are already working on an exit plan to cover whatever lies ahead.

However you plan on exiting your business, starting planning now. Even if those plans change, it is better to update an existing plan rather than having no plan at all.

Image Copyright: 123RF Stock Photo

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