Would Your Business Survive Without You?

As Benjamin Franklin put it, “there are two certainties in life, death and taxes.”  For business owners, a third certainty is thrown into the mix – the eventual exit from your business.  Whether this is by choice at retirement or by force as a result of unforeseen circumstances, a formal exit from the business will eventually take place.  The real choice is whether or not you plan for it.  While a succession or exit plan is crucial to making the life of a business a certainty, less than 30% of owners have any sort of plan in place.  A well designed plan will not only help you address the two certainties we all know exist – death and taxes – it can also increase the value of your business.

Value in the Eyes of a Buyer 

Have you ever thought about trying to sell your business or just wondered what it would be worth to a potential buyer?  Whether you plan to sell the business, pass it on to future generations, or simply cease operations at retirement, it always helps to know what your options are.  A good exit plan will not only provide you with a potential value of your business, it will also address ways to increase that value in the eyes of a buyer.  There are key value points and financial ratios any well-informed buyer will review.  You can maximize the value of your business by enhancing those key points long before a potential sale.  The single best way to ensure you have the most options available to you at any time is to run your business like it’s for sale – even if it’s not.  

Business Continuity

If something happened to you today, who would run your business?   Who would provide for your family? Would the business survive without you?  How will you retire, and when can you retire?  Will your business be passed on to children, employees, or sold to a third party?  The list of questions goes on with each one no less important than the others.  A formal succession and exit plan will address these concerns to ensure the necessary steps and procedures are in place for you to leave your business on your own terms when you want to, not when you have to.  If you are passing the business on to younger family members, it will address the best terms for doing so in the most tax efficient manner possible.  If you are selling the business to an outside buyer, a formal exit plan will help ensure you get the highest price for your business. 

Minimize Taxes

Laws require U.S. citizens to pay the taxes they owe, but nothing says they have to pay a penny more.  Are you using all the tools and strategies available to you to minimize your tax bill?  All business owners will pay a significant amount of income taxes during life and some will pay estate taxes at death.  An exit and succession plan can help you save money on both.  A thorough plan will address tax issues and potentially uncover overlooked tax savings opportunities both in current income taxes and future estate taxes.  In some cases, tax savings over the life of the business and in the owner’s estate can reach into the millions.  With continued tax scrutiny on small businesses and ongoing proposed changes to the tax system, implementing estate and tax strategies through formal planning has never been more important.

Highlight Problem Areas and Improve Profitability

It is always easy for a business owner to highlight the competitive advantages and strengths of his business, but what about the uncertainties, the eyesores, and the problem areas?  A non-issue to you may be a deal-breaker in the eyes of a buyer.  A formal analysis of your business can uncover potential issues or problems that will not only improve the “look” of your business but could improve the operations as well.  A review of these issues can help you refocus on profitability and long term goals.               

Regardless of your long term goals, failing to plan is planning to fail.  One of the most important things you can do today for yourself, your family, and for the future of your business is take the time to create an exit plan.  You already took the risk of starting a business and succeeded.  Don’t risk the life of your business by not creating an exit plan.

Would Your Business Survive Without You?

As Benjamin Franklin put it, “there are two certainties in life, death and taxes.”  For business owners, a third certainty is thrown into the mix – the eventual exit from your business.  Whether this is by choice at retirement or by force as a result of unforeseen circumstances, a formal exit from the business will eventually take place.  The real choice is whether or not you plan for it.  While a succession or exit plan is crucial to making the life of a business a certainty, less than 30% of owners have any sort of plan in place.  A well designed plan will not only help you address the two certainties we all know exist – death and taxes – it can also increase the value of your business.

Value in the Eyes of a Buyer 

Have you ever thought about trying to sell your business or just wondered what it would be worth to a potential buyer?  Whether you plan to sell the business, pass it on to future generations, or simply cease operations at retirement, it always helps to know what your options are.  A good exit plan will not only provide you with a potential value of your business, it will also address ways to increase that value in the eyes of a buyer.  There are key value points and financial ratios any well-informed buyer will review.  You can maximize the value of your business by enhancing those key points long before a potential sale.  The single best way to ensure you have the most options available to you at any time is to run your business like it’s for sale – even if it’s not.  

Business Continuity

If something happened to you today, who would run your business?   Who would provide for your family? Would the business survive without you?  How will you retire, and when can you retire?  Will your business be passed on to children, employees, or sold to a third party?  The list of questions goes on with each one no less important than the others.  A formal succession and exit plan will address these concerns to ensure the necessary steps and procedures are in place for you to leave your business on your own terms when you want to, not when you have to.  If you are passing the business on to younger family members, it will address the best terms for doing so in the most tax efficient manner possible.  If you are selling the business to an outside buyer, a formal exit plan will help ensure you get the highest price for your business. 

Minimize Taxes

Laws require U.S. citizens to pay the taxes they owe, but nothing says they have to pay a penny more.  Are you using all the tools and strategies available to you to minimize your tax bill?  All business owners will pay a significant amount of income taxes during life and some will pay estate taxes at death.  An exit and succession plan can help you save money on both.  A thorough plan will address tax issues and potentially uncover overlooked tax savings opportunities both in current income taxes and future estate taxes.  In some cases, tax savings over the life of the business and in the owner’s estate can reach into the millions.  With continued tax scrutiny on small businesses and ongoing proposed changes to the tax system, implementing estate and tax strategies through formal planning has never been more important.

Highlight Problem Areas and Improve Profitability

It is always easy for a business owner to highlight the competitive advantages and strengths of his business, but what about the uncertainties, the eyesores, and the problem areas?  A non-issue to you may be a deal-breaker in the eyes of a buyer.  A formal analysis of your business can uncover potential issues or problems that will not only improve the “look” of your business but could improve the operations as well.  A review of these issues can help you refocus on profitability and long term goals.               

Regardless of your long term goals, failing to plan is planning to fail.  One of the most important things you can do today for yourself, your family, and for the future of your business is take the time to create an exit plan.  You already took the risk of starting a business and succeeded.  Don’t risk the life of your business by not creating an exit plan.