As an entrepreneur, you’ve spent years putting your company first and nurturing the seed of your idea into a thriving business. An exit might seem far off in the distance, but thinking ahead can help to create a seamless transition to your life post-business. Trust us, your future self will thank you for easing the stress that can usually accompany a hastily planned exit. Here’s why you should start planning your exit strategy today.
You Have Time to Get the Few Big Things Right
When is the last time you stopped and asked yourself what YOU want in life beyond your business? Far too often, entrepreneurs ignore this question until they are forced to face it at exit, which may take some options off the table.
By taking a step back early on and asking yourself “What’s the money for?”, you can focus on the big picture, determine what’s truly important, and know what will be essential to get right. Proceed with caution, however. You can easily “should” yourself into exhaustion with an extensive list of upcoming to-dos, so it’s critical to consistently revert back to the big picture to help you narrow down these action items.
In crystalizing what’s important to you early on, you are leveraging a powerful asset when it comes to exit planning – time. Depending on your unique priorities, there may be strategies to consider putting into place well before you exit in order to set you up for success.
An example of a priority could be providing financial security for future, multiple generations of your family. Considering your estate strategy is one way to support that priority, which could include executing trusts or other arrangements to be funded prior to your future exit. It’s important to be mindful that some approaches take a significant amount of time to execute on…because with big decisions being made, the entirety of your financial situation must be considered. Waiting until an exit is imminent is a sure-fire way to add pressure and lose sight of what’s important to YOUR big picture.
You Can Test and Course Correct
Most entrepreneurs think about the value of their business often, but far and few between actually consider its value in the context of their future personal needs. When asked why they would want to know the value of their business, only 13% of business owners contemplated the value of their business in relation to their retirement planning,. Imagine relying on a single investment for the entirety of your retirement well-being (we don’t recommend this) and having no idea what that asset can provide – you would likely be in a state of uncomfortable uncertainty clouding your judgment and decision-making abilities.
Planning ahead can create clarity and trust in assessing where you are, the value you need to extract from your business at exit, and the likelihood that you will enjoy success over the long-term in meeting your goals. Bonus: these benefits can lead to you arming yourself with the confidence you’ll need when you’re approached with future offers. Maybe a deal comes along that’s all cash, but requires you to sell at a lower valuation than an earn-out would require. If that deal aligns with your values, allows you to achieve your goals, and sets you up for long-term success, then you are less likely to second-guess yourself as a result of having planned ahead and understanding your needs.
Prepping for your business exit strategy may also reveal that you aren’t quite where you need to be to get the valuation necessary to support what’s next. This knowledge and the time to course correct are invaluable and worth the cost of receiving a professional valuation of your company, even if you are nowhere near an exit.
You Can Assemble The Right Team
You wouldn’t sell your home without an expert you trust to show you the ropes, right? The same should be true of selling your business. In approaching exit planning alone, you risk arriving at short-sighted decisions, not extracting as much value as possible from your life’s work, and potentially missing key elements from your big picture. Early exit planning grants you the time to develop trusting relationships and assemble the dream team of financial mavericks who will work tirelessly to traverse you down a smooth path towards life post-business.
Oftentimes, your personal needs may be overlooked as you think about assembling your team. Involving a Private Wealth Design expert from the start can help you prioritize actions according to your big picture, coordinate the efforts of your various players, and create the clarity needed to set yourself up for a successful exit.
Emily M. Harper, CFP(R), Private Wealth Advisor. Emily’s background in the financial industry began after she graduated from the University of Virginia. During a seven-year run in various advisory and leadership roles at a global asset management firm, Emily acquired four industry licenses, a certificate in Financial Planning from UVA, and her CERTIFIED FINANCIAL PLANNER(TM) designation. She then joined the Team at Monument where she could truly serve clients through comprehensive Private Wealth Design.
At Monument Wealth Management, we specialize in taking complex, three-dimensional problems like business exits and providing solutions that are intelligent, thoughtful, and creatively conceived. Our solutions offer certainty and a sense of security – and if those are lacking in your life as you start thinking about a future exit, let us show you how Private Wealth Design can get you there. Monument Wealth Management is a Registered Investment Advisor (RIA). Please see Important Disclosure Information on our website.
 2018 Business Owner Perspectives Study, Mass Mutual.