Nearly 80% of business owners rely on their business as their largest retirement asset. In spite of this, business owners by and large neglect the need for planning to ultimately receive what they need from the business to secure their retirement income needs. A recent poll found that the majority of business owners don’t have any succession plan at all.
Aligning all of the components that make up a comprehensive transition strategy can be a difficult process for business owners. Without adequate time, resources or particular urgency to create a plan in advance of their departure, many owners delay the process or put it off altogether—only to be shocked by the reality that their business may not be transferrable when it’s time to transition.
If you are a business owner who has delayed planning and doesn’t know where to start, it is time to make planning a priority. As you begin, there are certain elements that must remain “top of mind” as you work toward a comprehensive strategy.
Top Three Components to Keep in Mind
For any succession plan to be successful, focusing on the following factors can provide a better outcome for you and your business:
- Keeping key employees loyal to business;
- Knowing what the business is worth; and
- Understanding your retirement income needs and how much of them can reasonably be satisfied by the business.
With somewhere between 60-80% of an owner’s net worth tied up in their business, knowing the value of your business may be the single biggest key to determining if your retirement goals are achievable.
Other Components to Consider
Furthermore, owners should also reflect on the following considerations as the various phases of the succession plan are developed:
- How the business would be affected by your death (or a key employee’s death);
- Who will take over if you leave the business or become disabled before your plan is fully implemented;
- Transitioning ownership of the company to insiders; and/or
- Finding a third party buyer when you are ready to move on to whatever is next for you.
The Legacy Advisors Network team is here to help you identify the gap between where you are now and where you want to be in the lifespan of your business. Contact our team of experts to learn more about our five-step process.