Wait, what Super Bowl? Didn’t chances for our Super Bowl end sometime in the second quarter of Week Two? Well, while that may have been arguably true for the Steelers, I was talking about your Super Bowl, not the local football team’s.
You know, your Super Bowl. The day you take your business – something you’ve spent a lifetime building and cultivating; blood, sweat, tears, the whole nine yards – and decide it’s time to ride off into the sunset (or, as Coach Noll would say, “Get ready for your life’s work”.) Are you ready for your life’s work? What will become of the business? Those are fairly weighty questions, so we’ll give you some things to consider as you ponder the answers.
A majority of owners have a substantial portion of their net worth locked up in their business. For many, that could mean 70% or more of personal wealth is tied up in the company, and the thought of parting ways with that in any manner can be intimidating. What transactional options do you have? What are the tax, estate and cash flow implications? Will you have sufficient liquidity to retire in the manner in which you and your family have grown accustomed? What are the pros and cons of these exit options and how do each align with your goals and objectives? What is your business worth and how do you de-risk and maximize enterprise value?
These are all valid questions when you consider that 60% of owners don’t have a formal exit and succession plan despite being 10 years or less away from planned retirement. Additionally, less than half of owners have completed a formal valuation of the business in the past three years, even though receiving “full value” is often a primary goal on most exit transactions.
Maybe you have family in the business and need to address gifting, trust, estate or potential generational transfer/sale considerations. Maybe you have a management group that would be interested in taking on the risks and rewards of ownership. Or, it’s possible you’d like to understand if a transition to an ESOP would be a good fit.
Maybe you’re more outwardly focused and would consider a sale to a strategic buyer, competitor or private equity. Perhaps the lure of the capital markets has you considering a public offering. Regardless of the underlying transaction options that may exist, understanding how to identify and build key value factors to maximize enterprise and transaction value is paramount to any owner’s goals and objectives.
Despite the fact that exit and succession planning is simply good business strategy, many owners procrastinate, allowing for the possibilities of death, disability, divorce and disagreement to cripple their Super Bowl run. They’ll point to the many obstacles that keep them from moving forward with succession planning, including not being aware of different exit options and their implications; no urgency; too busy working in the business (and not enough working on it); inability to develop and execute a plan; or failure to develop adequate workforce successors. For certain family businesses, owners might put things off as a means to avoid dealing with obstacles and issues unique to the family.
Overall, many owners struggle with overcoming the hurdles of understanding the transferable worth of the business, growing enterprise value and developing and executing an exit and succession plan, which is a primary reason that only 20% of privately held businesses available for sale each year actually sell. So whether you and your business are Super Bowl bound, or just trying to avoid a 7-9 season, Schneider Downs Exit Planning and Succession Advisors are ready to understand your goals and objectives, and provide holistic, customized and innovative solutions.
You’ve heard our thoughts… We’d like to hear yours
The Schneider Downs Our Thoughts On blog exists to create a dialogue on issues that are important to organizations and individuals. While we enjoy sharing our ideas and insights, we’re especially interested in what you may have to say. If you have a question or a comment about this article – or any article from the Our Thoughts On blog – we hope you’ll share it with us. After all, a dialogue is an exchange of ideas, and we’d like to hear from you. Email us at [email protected].
Material discussed is meant for informational purposes only, and it is not to be construed as investment, tax, or legal advice. Please note that individual situations can vary. Therefore, this information should be relied upon when coordinated with individual professional advice.