Business Exit Planning

You’ve worked hard to build your business…
Now let your business help fund your retirement

business owner with exit planning

Business Owners Lack Exit Planning

When business owners make money, they tend to reinvest it in their business or take it as personal income rather than using it to help fund their retirement. As a result, 78% of business owners plan to sell their business to fund 60% to 100% of their retirement.1 Yet many don’t have a written exit plan in place to help maximize the value of their business or understand how much their business may be worth, leaving their retirement funding up to chance.

exit plan chart

A Business Growth Plan Often Ignores Exit Planning

One of the key reasons business owners don’t have a retirement-friendly exit plan in place is that the typical financial planning approach focuses on business growth.

Planning to expand a business, access funding, manage taxes and mitigate risk are all critically important in the growth stages of a business. However, as a business owner begins considering an exit, the financial planning focus needs to change to analyze the value of the business, potential exit strategies and how far the sale proceeds will go in funding retirement.

Understanding Business Value Allows for Better Planning

After dedicating the time and energy to building a business — and investing in it financially, mentally and emotionally — many business owners struggle to objectively value their business. Others put off determining the value of their business because they feel the process is expensive or time­ consuming. Yet it is essential to understand the value of their business both in the negotiation process when it comes time to sell, as well as to realistically grasp the contribution the business sale may make toward retirement funding. Being unaware of the value of their business could result in missed opportunities for business owners — like the possibility of an earlier retirement or the ability to increase business value prior to an exit to better fund retirement goals.

Specialists in Business Exits Help Identify Gaps and Develop Plans

While many business owners may have a relationship with a financial advisor who helped them grow their business over time, as an exit approaches, partnering with a financial advisor skilled in coaching business owners through an exit can help maximize retirement funding. Financial advisors specializing in business exit planning partner with both CPAs and their clients, putting together their expertise with detailed information about the business and the business owner’s goals to develop a gap analysis that outlines how well the sale of a business will cover retirement income needs. They also help business owners develop plans for how to maximize funding and reduce risks in reaching retirement goals.

1 Small Business Owners Ignoring Succession Advice: Poll, CNBC, April 13, 2015.  
2 Small Business Owners Plan to Exit, but Aren’t Exit Planning, Securian Financial Group 2015 Small Business Owner Life Stage Study.

The software screen images depict a hypothetical example and is not representative of any specific investments. Your results may vary.