Am I Positioned to Sell My Business and Meet My Ideal Retirement Goals and Expectations?

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Am I Positioned to Sell My Business and Meet My Ideal Retirement Goals and Expectations?
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Am I Positioned to Sell My Business and Meet My Ideal Retirement Goals and Expectations?

Selling Your Business

I recently presented to a room full of successful business owners on the topic of “ensuring your business is part of your retirement strategy”. What became immediately clear was the level of success these individuals have recognized as they continue building their respective companies… and ultimately their net worth. The stories shared had many similar financial characteristics including: record sales growth, impressive earnings, strong revenues, great cash flow, ability to reinvest back into their companies, as well as healthy distributions back to the owner that allowed for living an enviable lifestyle.

Stepping away from the discussion of their shared business successes, I inquired on how many owners had a concise vision of when they planned to step away from their business and what their ideal retirement (or post-business life) looked like. Roughly 50% of the room raised their hand with the majority planning to exit within 3 to 10 years. They shared visions of extensive travel, second homes, giving back to their communities, spending quality time with family, new hobbies, starting a new business, etc. The overriding goal was to be financially independent of course!

I followed that question up with how many knew what their business was accurately worth today. Around 30% of the group had confidence they had a “decent” handle on a range of what their company would sell for, albeit closer to 10% had actually gone through the formal process of completing a valuation on their business (taking into consideration different tax strategies and values to anchor into when it comes to an insider sale versus a third party sale). I always caution an owner that simply comparing to a competitor can be very dangerous when companies can prove to be very uniquely different. Using an industry standard multiple of annual revenues can also be misleading.

My final inquiry of the group was to identify who knew precisely what they needed to sell their business for to reach their ideal goals and objectives for their families, factoring in their non-business assets as part of the equation. Only 5% of the room at this point could confidently raise their hand, with nearly everyone else visibly in deep thought on what gaps they might have when it comes to their own personal financial picture beyond the business.

As is normally the case with an owner, they are so locked in and focused on growing their company today, they haven’t thought much about their future beyond the business. A 2014 survey of 354 business owners (from Business Enterprise Institute, Inc.) offered some interesting statistics:

  • 79% plan to exit their business in the next 10 years
  • 75% have never tried to exit a business
  • 85% do not have anyone to replace their skills or responsibilities
  • 31% have discussed their exit with only their spouse and family…BUT…
  • Only 8% have put their plans in writing, and
  • 100% will leave their businesses at some point – willingly or not!

For those with major gaps and questions to where they stand today, we offered a few recommendations of things to do now so they can start to close the gap and gain greater clarity. These recommendations include:

  • Start having discussions with your trusted advisors, or begin to assemble the right professionals if you don’t have a team in place.
  • Determine your target date for eventual retirement or selling your business
  • Calculate “The Number” you will need for your ideal retirement.
  • Consider the different exit paths for internal and 3rd party strategies to sell your business (see whitepaper on Exit Routes For Business Owners)
  • Get a current valuation for your business
  • Take a look at your current continuation plans, such as any buy/sell agreements
  • Start to diversify your personal balance sheet beyond your business, making you less dependent on having to maximize the business sale to meet your goals.

Whatever you’re ideal retirement or post-business life looks like… you are better served to have formulated a plan versus leaving things to chance. This includes making sure your business is highly desirable with the right people in place to succeed you, having the proper protections in place should something happen to you, getting the right team of professionals in place to guide you to the most optimal result of selling your business, as well as meeting your personal and family goals as you transition into the next chapter of your life.

Over our 25 year history, we have successfully guided a number of business owners through the transition of selling their business, unleashing them from the complexities of their wealth through our disciplined approach of Evidenced Based Investing (EBI) and Strength Based Wealth Management (SBWM).

R. Brady Siegrist, CFP®

Brady Siegrist, CFP® is Managing Director of Wealth Management of Janiczek® Wealth Management, which exclusively serves high net worth investors (individuals with $2 to $20 million portfolios) and ultra-high net worth investors (individuals with $20 million+ portfolios) across the country.

With his Bachelor’s degree in Finance from the University of Colorado, his CERTIFIED FINANCIAL PLANNER™ professional designation and 15+ years experience in the financial services and wealth management industries, Brady brings superb technical expertise and experience to Janiczek®’s disciplined Evidence Based Investing (EBI) and Strength Based Wealth Management™ (SBWM) platform. Mr. Siegrist is a Partner of the firm and a member of its executive Leadership Team.

bsiegrist@janiczek.com
(303) 339-4484

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