To many baby-boomers, the idea of retirement is more terrifying than it is exciting.
For the generation of entrepreneurs who invented the 50-60 hour work week, the thought of shifting away from a work-centric lifestyle can be unfathomable. Countless hours – years of your life– have been invested in growing your business and its continuation and success is significant.
In the next 10 to 20 years, the majority of baby-boomers will be ready to transfer their businesses. This will create a buyer’s market and making your business attractive will be key to a successful sale.
In other words, younger generations (Gen X and Gen Y) will have the opportunity to be very selective with where they invest their money. In his book Walking to Destiny, Christopher Snider writes, “only 2 out of 10 businesses that go to market will actually sell.”
For those business owners that expect to transfer their business to a family member, only “30% of all family-owned businesses survive into the second generation. Twelve percent will still be viable into the third generation, with 3% of all family businesses operating at the fourth-generation level and beyond” (Joseph Astrachan, Ph.D., editor, Family Business Review).
Creating a succession or exit plan is one of the best ways to ensure you either get the best value from your business or that it continues to thrive when it comes time to start the third-act of your life. Pulling all your key advisors – lawyer, accountant and financial advisor, to name a few – together to work with a Certified Exit Planning Advisor (CEPA) will enable you to build an exit plan considering all scenarios.
Questions like “who will I be when I am no longer a business owner?” and “how do I want to spend my time in retirement?” can be intimidating enough to dissuade business-owners from establishing an exit plan. Sometimes, baby-boomers are put-off by the thought of transferring their businesses to younger generations for fear that years of hard work will be squandered by those who don’t understand their vision.
The key thing to remember is: exit-planning is a journey, not a destination. A critical aspect of establishing and running a business is also having a succession strategy in place, even if retirement is decades away.
Having an exit plan, put simply, is good business strategy. It integrates business, personal, and financial goals and works to maximize business value while also prioritizing what life after business will look like.
If you have any questions about your exit plan or how to find a Certified Exit Planning Advisor to help you make yours, connect with us.