Gina P. Slayton, CFP^®, CEPA^® – Wealth Advisor

Business owners have rarely faced environments as complex as what you experience today. Among these complexities are the competing challenges of navigating business cycle uncertainty, worker shortages, ever-changing technology, and balancing your family needs – and that’s just to name a few. These demands, often involving short-term and immediate concerns, can make it tempting to delay longer term issues like personal planning for your eventual exit from the business.

Likely the largest asset on an owner’s personal balance sheet is the business itself, which means the business value deserves a comprehensive analysis through the lens of a personal financial plan. It is ideal to start planning for your “life after” several years before you’re ready to exit – well ahead of when many begin this work. A well-planned transition provides enormous clarity on how you envision a fulfilling life without the business, and it can help to keep you from becoming one of the 75% of owners who regret selling their company (Exit Planning Institute).

A useful starting point is to determine your family’s wealth gap – the shortfall between your future wealth goal for a successful retirement and existing assets saved outside of your business. The gap between that future goal and your current personal financial assets is most commonly filled with a monetization of the business. Calculating the wealth gap sounds simple in theory, but can prove difficult when you dive into your family’s finances, separating the personal expenses from the business ones and adding in plans for future family gifting, philanthropy, travel, and healthcare. A qualified professional can help you layer in additional key planning factors like appropriate assumptions for growth rates, taxes, inflation, and safe withdraw rates.

If after thorough examination, your wealth gap is more than covered by the post-transition value of your business, then you can breathe a sigh of relief. There are great planning opportunities to consider here, such as gifting shares to charity or loved ones, taking a lower deal value for a better culture fit, retiring early, or increasing lifestyle spending. If the wealth gap exercise shows that your financial picture is not on track yet, there are many possible strategies available and time to implement positive changes before a transition occurs.

Over the years, many owners put their company first and forget to plan for their and their family’s own best interest. Giving yourself plenty of time to develop a successful personal plan will help safeguard your family’s future, providing peace of mind for when that transition does occur.