Business owners rarely include exit planning or planning for their exit in the business as part of their daily tasks. In fact it is usually the last thing owners want to think about. Running the business generally takes precedence and is always on the “front burner.”
When owners finally reach that inevitable crossroad of thoughts between the places they want to visit in the future and things they want to do exit planning may begin to move up to the front of the stove. In short when owners begin dreaming of accomplishing the things on their “bucket list” exiting the business may come to mind. A successful business Exit Plan achieves three important owner goals:
Financial Security. The business sale or transfer provides the amount of income the owner and owner’s family needs after the owner exits.
The Right Person. The owner must choose the successor.
Income Tax Minimization maximizes the amount of cash in the departing owner’s pocket.
Part of a well planned exit plan for your business also includes a successful estate planning provision developed not only for when you exit your business but to determine practically and legally what plan lies ahead once you exit this life. A successful Estate Plan also includes three important goals.
Financial Security for the decedent’s heirs.
The Right Person is chosen by the decedent (not the State) and not the state.
Estate Tax Minimization to reduce the Government’s bite leaving more funds for one’s heirs.
Once owners notice that the two processes share the same goals they can appreciate how to leverage the time and money they spend developing their Exit Plans into the design of their estate plans. By thinking of exit and estate planning in tandem the owner’s entire future strategy can be brought into focus. Since both planning your exit from your business and planning your exit from this life are based on the same premises it can be relatively easy to develop a consistent outcome.
Remember that an exit plan for your business helps guide you through the exit process and addresses the challenges and decisions the owner will face. The exit plan will document the entrepreneurs road map based on the owner’s objectives.
Estate plans will work along side the exit plan with the same objectives. Neither plan is a rigid “to do list.” They are flexible and recognize the changing economic business and personal environments. As the owner’s objectives change over time the exit and estate strategies considered will change to address the new priorities.
So when that front burner moment starts to heat up keep in mind that Exit and Estate Planning involves establishing exit objectives and SMART goals (Specific Measurable Attainable Relevant Time based) to attain a reasonable and attainable goal for your business and your future.
When it comes to asking the question “which one first?” there just isn’t one right answer. The bottom line is that they both require attention since failure to act in either situation creates lasting problems for you your business and your family. But if carefully crafted both plans can be devised in tandem to provide workable and practical strategies for handling your business.