Exiting Your Business: Do you have a plan? Series I Article I
You’ve heard the hype. The business owning baby boomers and post WWII generation have already begun exiting their businesses to move on to whatever their definition of “retirement” turns out to be. The coming “Age Wave” will result in an unprecedented transfer of more than $10 Trillion of private wealth to the next generation of business owners. source: “The $10 Trillion Opportunity”, R. Jackim / P. Christman
· Fact: over 77 million Baby Boomers are between the ages of 47 and 65.
o That represents about 28% of the U.S. population
· Demographic experts predict that over 50% of privately owned businesses will change ownership in the next 5-10 years.
· According to the chart below, at its peak, there will be over 500,000 businesses for sale in the U.S. during the 10 years from 2015-2025.
· According to the U.S. Small Business 80% of small businesses will fail to sell.
Chart Source: Exit Planning Institute
Formulating and executing an Exit / Transition Plan is the most effective way to prepare for the “Age Wave” and ensure your most important financial asset provides for the next challenge you choose to pursue and leaves the legacy you envision.
So, what is an Exit / Transition Plan?
An Exit or Transition Plan is an integrated approach designed to help business owners address all of the:
· Business
· Personal
· Legal
· Financial
· Tax, and
· Insurance Issues involved in exiting a privately held business.
A well developed Exit or Transition Plan will address the following general goals:
1. Maximize the value of the business
2. Minimize Estate and Capital Gains Taxes
3. Maximize the owner’s “Life After Business Satisfaction”
All goals and objectives are driven by the business owner and their wants and desires. Some may want to pass the business on to the next generation, while others may decide to sell to a 3rd party. An Exit / Transition Plan will allow the owner to consider all the possibilities and help them choose option that meets their goals and objectives.
To be perfectly clear, and a little blunt ………everyone will exit their business. Some will do it voluntarily, after careful planning, making certain their life’s work enables them to move successfully on to the next challenge they choose to pursue. While others will exit involuntarily, with no plan in place, leaving headache and heartache for the loved ones left behind, who will never get to reap the benefits of the blood, sweat and tears expended to build their business.
Which type of owner do you want to be?
Cliff Olin, MBA, CM&AA, CEPA and principal at Olin Capital Advisors, a small to mid market, mergers and acquisitions advisory and exit planning firm. Cliff is a Certified Exit Planning Advisor and has spoken to many groups regarding Exit/Transition Planning. He can be reached at colin@olincapital.com.
