Exit Planning Offers Assurance

Running a business can be one of the most fulfilling things you ever do. You dedicate everything you have to position the company to be successful. With all the effort you pour into your business, it’s prudent to dedicate the time and money to protect against risks and prepare both yourself and your business for your eventual exit.  

Following are a few ways that exit planning offers assurance that you have strategies to reduce risks and strengthen the business you’ve worked so hard to build.  

Building your retirement vehicle  

Your business is likely to be the most important piece of your financial security puzzle. This means that your business will eventually need to be worth enough to allow you to leave with enough money to never have to work again (unless you choose to).  

To position yourself and your business for this eventuality, you’ll need a few pieces of information:   

  • How much money you need to achieve financial security  
  • How much you currently have, combining both personal assets and business value  
  • How much you need to close the gap between the two (the asset gap)  

Fortunately, a thoughtfully selected advisor team can work with you to gather and calculate this information. Then you and your advisor team can create a road map that offers guideposts and a timeline for what you need to do to strengthen your financial position and build business value. 

Entering the exit planning race  

Once you determine what you have, what you need, and how long it will take to close any asset gap, you can implement strategies that put you on track for a successful exit.  

You’ll probably discover that you need to increase the value of your business to close the asset gap. This is not a sign of a weak business. In many cases, this may signal that your business relies so heavily on you that if you were to ever leave it (by choice, death, or otherwise), its value would decrease.  

To address owner dependence, your advisor team might recommend some of the following value drivers:  

  • Recruiting and installing next-level management  
  • Creating operating systems that increase sustainable cash flow  
  • Diversifying the customer base  
  • Developing a realistic growth plan  

Remember, exit planning isn’t about doing these things instead of running your business. In fact, your advisor team will help you develop and implement these plans in ways that allow you to focus on strengthening your business while you run it.  

As you implement these strategies to increase business value, you may find that these improvements provide more time to focus on the things you love most in your business, and require less time for things you don’t enjoy. This is a major benefit of delegating to a next-level management team that you trust.  

Preparing for pit stops  

Exit planning helps build your retirement vehicle and get on the track; it also helps you anticipate pit stops along the way.  

For example, you may have created a plan to transfer your business to one of your children, only to find that the child no longer wants to lead the company.  

Exit planning allows you to pivot more nimbly to an alternate plan because of the value drivers you’ve instituted. Even though the precise transfer you expected may not come to fruition, you can still move forward in productive ways toward financial security and your other goals without having to scrap your plan and start over, potentially saving you time and money.  

An extra set of keys  

A key element of exit planning is the creation of a Business Continuity Plan. This plan provides instructions to family members, key employees, advisors, and others about what to do with the business, your personal finances, and more if you were to suddenly die or become permanently incapacitated.  

Sudden death or incapacitation can leave your business (and everyone who relies on it) in an exceedingly challenging position. A Business Continuity Plan allows you to offer strategies that could make your sudden transition out of the business easier to navigate. These strategies may include the following guidance:  

  • Who should run the business in your absence  
  • Who to contact to set the Business Continuity Plan in motion  
  • What should happen to the business over time (e.g., sale to a third party, estate plans)  
  • Where to find critical information (e.g., bank accounts and passwords, lockboxes, business licenses, proprietary information)  

This risk mitigation strategy can help provide your family, your employees, and you more peace of mind knowing that you have a plan for the unexpected. And creating this Business Continuity Plan while things are relatively calm—rather than in the middle of a crisis—could help reduce the time and cost of implementing the steps needed to keep your business afloat without you at the helm.  

We strive to help business owners identify and prioritize their objectives with respect to their businesses, their employees, and their families. If you have questions on this topic, we can help with more information or a referral to another experienced professional. Please feel free to contact us at your convenience.  

Imagine a world where your financial advisor, attorney, accountant, insurance specialist, and property/casualty advisor all worked together, like a board of directors on your behalf. This is the type of Collaborative Advisory Team approach we take in our practice. For many driven entrepreneurs, executives, and high-net-worth individuals, a Collaborative Advisory Team of professionals is the most effective and efficient way to achieve your optimal financial world. At Moneta, we’re reinventing the way you experience wealth management.

The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need. 

This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm.  We appreciate your interest. 

Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity. 

© 2024 Advisory services offered by Moneta Group Investment Advisors, LLC, 100 South Brentwood Blvd., St. Louis, MO 63105 (“MGIA”), an investment adviser registered with the Securities and Exchange Commission (“SEC”). MGIA is a wholly owned subsidiary of Moneta Group, LLC. Registration as an investment advisor does not imply a certain level of skill or training. The information contained herein is for informational purposes only, is not intended to be comprehensive or exclusive, and is based on materials deemed reliable, but the accuracy of which has not been verified. Examples contained herein are for illustrative purposes only based on generic assumptions. Given the dynamic nature of the subject matter and the environment in which this communication was written, the information contained herein is subject to change. This is not an offer to sell or buy securities, nor does it represent any specific recommendation. You should consult with an appropriately credentialed professional before making any financial, investment, tax, or legal decision. Past performance is not indicative of future returns. You cannot invest directly in an index. All investments are subject to a risk of loss. Diversification and strategic asset allocation do not assure profit or protect against loss in declining markets. These materials do not take into consideration your personal circumstances, financial or otherwise. Trademarks and copyrights of materials linked herein are the property of their respective owners. 

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