Question #1: How much money do you need to exit the business?
At first glance, this sounds like an easy question to answer, but as you dig deeper into what makes sense for you as you leave your business, the answer gets much more complicated.
For example, even if you are lucky enough to find a buyer who will pay cash to buy your business, you probably have not given much thought to what happens next.
Here’s what I’m talking about…
Not too long ago, I was visiting my local bank and the branch manager was trying to sell me a 5 year CD at 1% interest. I said to him… “Wait a minute. Are you telling me if I give you $100,000 in cash today, all I will get for it is a piddly $1,000 for an entire year ($83 per month)?”
He was too embarrassed to answer.
Let’s expand on that… if you sell your business today for a net gain (after costs) of $1,000,000, you probably will still have to pay a capital gains tax of 20% – leaving you with $800,000 to finance your retirement. Check with your accountant to get your numbers.
Next, let’s say I introduce you to my friendly banker and he convinces you to take your nest egg of $800,000 and buy a 5 year bank CD. Your monthly income will only be $667!!!
Can you retire on that?
Question #2: When do you want to leave (or transition from) your business?
Or maybe a better way to put it… how long do you have to plan your exit BEFORE your exit?
The strategy will be a lot different if you plan on leaving your business in 1 or 2 years versus 10 years.
I hope the answer to Question #1 above convinces you to immediately implement an exit strategy plan that is customized for your business. The longer you wait, the harder it will be to do it it right.
Question #3: Who is your target buyer?
Do you want to transfer ownership to your children? Employees? Or are you aiming to sell your business to a third party?
It is important to make this decision as early as possible so you can begin structuring your business to maximize your profits as you transition out of the business. Doesn’t matter if it is 5 months, or 5 years. What you do RIGHT NOW will be a huge determining factor how successful your exit will be!
What you should do now…
One of my biggest frustrations as an exit strategy coach is trying to convince business owners they can never be too busy working in their company to work on the most important financial event of their business lives.
They just keep putting it off.
It’s kind of like buying life insurance. If you wait too long and something bad does happen, it’s too late!
Isn’t it time for YOU to stop hitting the snooze button and begin planning for the most important years of your life?
Exit planning for business owners is critical. You business is counting on you. Your family is counting on you. Your retirement is counting on you.
Stop hitting the snooze button and contact me today.