Most of the issues presented
apply to all business owners, not just Baby Boomers. However, the main issues
of particularly greated concern to this group would be –
1) Element of time – with less of
it to waste, it’s even more essential to take action sooner vs. later
2) Greater likelihood of the dreaded
D’s – death / disease / disability; from a risk management perspective there
are the twin aspects that increase with age: 1) probability of occurence 2)
potential impact
Back to the issue of timing, the
simple answer is that « there’s no time like the present. » Here’s a
specific example of how time can be a critical factor:
During startup a business may have
chosen to form as a C-corporation for faster build up of capital through reduced
taxes. Now at the retirement / transfer stage for the business, some owners
can benefit from S-corp’s to avoid double-taxation.
Well, the simple answer seems to
be to covert just prior to your exit strategy. Unfortunately, the IRS thought
of this also, and making this change within 10 yrs results in a 2nd tax for
« built in gain. »
No matter what,
one of two things will happen –
1) Transfer of ownership
through an exit plan
– Results in orderly
process involving 3rd party, key employee / owner, or family member
2) Your death or disability
forces liquidation of your business, resulting in some unpleasant possibilities..
– Surviving members being
forced to work with or share ownership with an inexperienced or untrustworthy
strangers that buy the departing co-owner’s share– Being forced to work
with a inexperienced, immature or bitter family members of the deceased– Inheriting a small
business interest that no outsider wants to buy and no insider will give a
fair price– Not reaching a price
that the surviving co-owners & heirs can agree upon to pass the controlling
interest
The only sure things in
life are death and taxes, as they say. This certainly applies to the life of
a business as well.
So what can you do? Start
the process – get the ball rolling. As Stephen Covey says, « Begin with
the end in mind.. »
Key first steps:
1) Determine your goals
/ objectives
2) Get a valuation of your
business
3) Review how well your
advisory team supports your goals / objectives; fill in gaps
You’ve served the world
through your business. Now how will your business serve your needs?
I recently became affiliated
with BEI – Business Enterprise Institute – because of their process approach
in helping my clients to develop their exit strategy. The founder has advised
business owners for over 30 yrs before forming this organization to pass on
his knowledge and experience in using this planning system.
John Y. Chang, MBA
Daniel Winkler & Associates
If you’re a Baby Boomer
who owns one of the « 12 million privately owned businesses, of which more
than 70% are expected to change hands in the next 10-15 years.. » – Robert
Avery of Cornell University, February 2006 ..what’s your exit strategy?
http://www.johnchang.info/exitstrategy/
