Posted by: Stephen Ross, Partner at Commonwealth Financial Group and Director Co-Chair, Youth Remodeling Career Day
Owning a successful business takes vision, preparation, skills, desire, and a focused dedication to achieving your goals. If you are like most business owners, you have worked very hard and endured many sacrifices to grow your business. That is why you should put just as much energy into protecting it as you did building it.
With that in mind, ask yourself these important questions:
Do I have a comprehensive plan that fully integrates my business, personal, tax, and estate planning?
What is my business worth?
Am I doing everything I can to enhance the value of my business?
How can I most tax efficiently monetize my business at retirement?
Do I know what will happen to my business when I retire?
Is my family adequately protected if something were to happen to me?
Is my business capable of continuing its success in the event of my partner’s untimely death or disability?
Have I done everything I can to attract, retain, and reward key employees that are critical to my business?
Do I have confidence in my exit strategy and/or successor?
Having answers to these questions and a solid business plan in place is important to help ensure the ongoing success of your business and the value you can and should expect to receive from it.
Here are a few business planning strategies to consider:
Business Valuation. The business is often the single largest asset of your net worth. It will be looked upon to provide income and support, now and in retirement. Understanding how to maximize the value of your business while minimizing outside risks that can destroy it is paramount.
Buy-Sell Agreements and Protection Strategies. In the event of a business owner’s death or disability, a Buy-Sell Agreement will define the terms of the buyout of the owner’s interest in the business. By establishing a Buy-Sell Agreement, you can help ensure a smooth transition of ownership, with minimal disruption to the day-to-day activities of the business. Having an agreement and a business valuation in place also ensures the owner’s surviving family will receive the fair market value of the owner’s share of the business. Without these mechanisms in place, the owner’s surviving family could see as much as a 50% reduction in the value of the business once sold.
Attract and Retain Key Employees. In today’s highly competitive environment, it is becoming increasingly more difficult to attract and retain top talent. Salary is not the compensation driver.
Individuals also look at an employer’s overall benefits package and potential to address real concerns of financially protecting their families, in addition to adequately planning for retirement.
In conclusion, in today’s competitive marketplace, it’s becoming more imperative to have a plan in place that is aligned with your goals and put you in the best position to achieve them. Having answers to the questions above and key business planning strategies in place can help you to do just that.