Polish the Diamond
The old Chinese proverb says “the longest journey begins with a single step”. Nowhere is that proverb more applicable than in the field of exit planning as it relates to the owner of the privately held business. Taking that first step is often the hardest part. It certainly is in the case of the business owner who has spent the better part of his or her life building a business and now faces the frightening prospect of finding a way to exit the business referred to as exit panning or exit strategy.
Most of the common objections as to why a business owner puts off the succession planning process are:
· They are not sure what they should do to start or where to look for help
· The topics relating to the sale of the business are too private or taboo to discuss with others
· So much time is spent putting out fires that little or no time is left to focus on long term planning
· The time is not right to begin the process
· The mere thought of the exit process is too daunting
· The owner is afraid of what life would be like without the business so they do nothing.
With all the anxiety associated with the exit planning process it is small wonder that fewer than 30 percent of private business owners do any exit planning. The majority of business owners happily continue running their business day after day with no thought about the many hazards that lie in wait for the business owner who did not deal with those critical elements that absolutely need to be addressed for the continued success of the business and the security and happiness of the business owner and his or her family. Often business owners believe they have an exit plan in place because they may have focused on one element of the succession plan such as estate planning or management succession. While this is a start it is insufficient and ignores the very important areas such as the money needed to fund retirement, estate tax, gift tax, life insurance, shareholder agreements, key employee incentives and corporate finance. The foundation of exit planning needs to start with the value of the business itself. Without knowing the value of the business the business owner cannot plan for retirement, formulate tax planning, create a good estate plan or full understand the means to define the legacy that the business owner seeks to achieve. Without a baseline certified business valuation the business owner is adrift in the current without the means to steer a course. Poor decisions are the result.
How do you know how much a business is REALLY worth?
Your accountant can’t tell you. Your attorney can’t either but the Internal Revenue Service can and without a current certified third party business valuation on file you, your account, attorney or your successors will be placed in a very awkward position when the IRS levies capital gains tax or estate tax on sale or transfer. The prudent business owner will have a current certified business valuation on file.
Do the Hard Thing
Most owners do not invest much thought or do much planning in planning ownership transition. If you are serious about selling your business to an independent third partybuyer, a family member or you are thinking of doing an Employee Stock Ownership Transfer (ESOP) separate yourself from the ordinary by obtaining a certified business valuation. You will enhance the return on investment ( ROI) by doing so and you will be in a position to achieve the retirement goals that you have worked so hard to attain. Polish the Diamond that you have created and then move into the different phases of the exit planning process. We make it easy for you to get started by our four step exit planning process starting with data collection, valuation /analysis, recommendations and implementation. It may be a fairly long journey but taking that all important single step is so important.