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Planning for a Future Exit - Part 1 - The High Cost of Procrastinating
We dedicate years of study to qualify for our chosen careers; we save diligently for our children's education; and we conduct thorough research for our business decisions. Yet sadly, we devote little time preparing to leave what we've spent decades nurturing. An exit entails more than the succession or sale of your business. When it is planned for properly, it involves structuring your business for more choices and profit.
Exit Planning Exchange (XPX) Summit 09 was held last week. The focus of the conference and organization is to educate professionals who help clients prepare for business exits, while facilitating collaboration among advisors. Many of the speakers, including me, noted how frequently we encounter business owners who are reluctant to plan for their exits. With baby boomers turning 60 years old, analysts predict that in the next five years we will witness a turnover in the ownership of fifty percent of businesses. How many of those companies have started preparing for this change? The answer: only about twenty percent.
By not preparing for this rite of passage, you risk—at a minimum—leaving considerable money on the table. You also chance the chaos of a sudden, unplanned exit. Death or disability of the head of a family-owned business has been known to create relationship-dissolving conflicts. Finally, financial security built over decades can be swiftly undone.
These risks demonstrate a solid case for preparation, yet many business owners still neglect planning for the final phase of their business. They typically try to quickly unload their companies in six to twelve months, very often without success. The optimal time to develop an exit plan is five years in advance.
Here are some common barriers to exit planning and how to overcome them:
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