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Are you considering transitioning out of your business but are worried about the unknowns and potential risks? You're not alone. Fears about financial stability, losing control, and maintaining relationships are common among business owners who are considering a transition. But with the right planning and preparation, you can overcome these fears of business transitions and make your exit a smooth and successful one.
One significant worry that business owners have when transitioning out of their business is whether they will get a fair price for it. For most owners, selling a business is the single largest transaction they will enter during their lifetime, and mistakes can be costly. You may also be concerned about how you will manage your finances after the sale, since you will likely receive a large payout upon the closing of the sale. It’s important to have a sustainable post-sale financial plan in place to manage your finances.
The first step in overcoming this fear is to engage in wealth gap analysis. If you engage a Certified Exit Planning Advisor (CEPA), they can take you through the process. The wealth gap refers to the difference between the amount of wealth that a business owner currently has (or is expected to have upon the closing of the sale or business exit based on the business valuation) and the amount of wealth that they will need in order to achieve their desired post-exit lifestyle.
Therefore, when planning to exit your business, it's important to determine how much money you’ll need to support yourself and your family after the sale (and after taxes) to maintain your current or desired lifestyle. This includes considering factors such as living expenses, retirement goals, charitable contributions, and other financial commitments.
Wealth gap analysis is a key step in the CEPA process because it helps business owners identify any shortfalls in their post-exit financial needs. By understanding the size of the wealth gap, you can take steps to develop a plan to ensure that you are financially secure after the sale of your business. Steps included in this plan may involve employing strategies such as increasing the value of your business, saving more money, investing in income-producing assets, or adjusting your lifestyle goals.
Financial anxiety isn't the only fear that can stress a business owner who is considering an exit. Many business owners have dedicated years of their lives to building and running their businesses. The idea of letting go of something that has been such a significant part of your life and has provided purpose to your daily life can be scary and overwhelming. For many business owners, your business is not just a source of income, but also a reflection of your identity and personal values. Selling the business means giving up control and potentially losing that sense of identity and purpose.
What will motivate you to get out of bed in the morning? Will you focus on philanthropy or use your newfound freedom to pursue personal interests? After dedicating your time year after year to your business, finding the next fulfilling activity can be a challenge.
To overcome this business transition fear, you need to think about and plan ahead for your future. Deciding what you’ll do on a daily basis post-transition and knowing what activities will continue to bring purpose to your life should be part of your personal transition plan.
Don’t put it off — you’ll find yourself post-transition feeling lost and without purpose. Take the time to carefully consider your wants, wishes, and options. Talk to your business advisors, your family and friends, others in your support system, or even a therapist to help you sort through your choices and come up with a plan.
Concerns about employee and customer care is another common source of stress we often hear about from business owners who are preparing to transition out of their business. Business owners often worry about the impact that selling their business will have on their employees and customers. You may worry about whether your employees will be able to keep their jobs or whether the new owner will treat them well. Will the level of customer service your company is known for last after you’ve sold your company?
To alleviate this worry, it’s important to work on finding the right buyer. Consider buyers whose vision aligns with yours and is a good cultural fit. Evaluate which buyer has conveyed a post-close plan of operations that resembles your expectations.
A CEPA can help you understand the different transition options, as well as help you compare different offers, to find the one that best alleviates your concerns and achieves your goals.
Are you looking to transition out of your business and secure your financial future? It's time to overcome concerns or fears of business transitions and schedule a meeting with a Certified Exit Planning Advisor (CEPA) at Delap.
Our team of experts is trained to help business owners like you navigate the complexities of business exit planning and achieve their financial goals. We understand that every individual and every business is unique, which is why we take a personalized approach to each client engagement.
When you work with a CEPA at Delap, you can expect assistance in the following areas:
Our goal is to help you achieve a successful and financially secure transition from your business into your retirement life. With our guidance, you can feel confident that you are making informed decisions and taking the right steps to secure your future for yourself and your family.
Don't wait until it's too late. Schedule a meeting with a CEPA at Delap today and take the first step toward a successful transition.