201704.12
0
0

Advisers help business owners develop an exit strategy

by in News

This is an article from the Reading Eagle/Tuesday December 22, 2015. Written by Brad Rhen, Money Reporter, Reading Eagle.

Just when I thought I was out, they pull me back in.

– Michael Corleone, “The Godfather: Part III”

Starting a business is one thing. Getting out of that business when it’s time to move on is another.

While most businesses might not be as difficult to leave as Michael Corleone’s family business, they still can be tricky to get out of. There are many things that business owners must consider when the time comes to hang it up.An exit strategy is one of the most important, yet least thought out, elements of a business plan, said Kevin J. Miller, an accredited asset management specialist with Berkshire Investment Group, Wyomissing.”The importance of an exit strategy is for any unforeseen circumstances where the business owner can no longer fulfill his duties in running the business,” Miller said. “If there is no succession or takeover plans and a disaster occurs, the employees, clients and company could be in peril.”at it is critically important to develop an exit strategy. It is especially important for a small business that might not keep up with their finances accurately, Curran said.”There’s a lot of financial assessments,” he said. “Done right, it’s a long-term process. You don’t just wake up one morning and snap your fingers and sell your business.”

Making a deal

Once a business owner has decided it’s time to get out of business, the first thing he must do is decide what type of deal he will make to divorce himself from the business. There are several types of deals when getting out of business, including passing it on to a family member; a cash sale to a third party; a buy-sell agreement; a buyout or recapitalization; and an employee stock ownership plan.

“This is totally an individual strategy that varies case to case, based on the structure of the business,” Miller said. “It is important to consult business valuation professionals and legal experts to ensure fair and equitable distributions to all the parties that are involved.”

Keeping it in the family

Turning a business over to family members has the potential to lead to complications and strained relationships. Curran said many small family businesses ignore this issue because they don’t want to deal with it. Oftentimes, they will just dump it onto the next generation and leave it to them to figure it out, he said.

“The worst thing I’ve seen is the family members develop expectations that they created for themselves, and then it doesn’t go that way,” he said. “Having expectations laid out on the table and communicating with family members so they know what they are is critically important. There’s a business dynamic, and there’s a family dynamic. Trying to harmonize them is a very tricky endeavor, especially when it’s not discussed and communicated.”Miller noted that the transition of Berkshire Investment Group from his father to him took place over multiple years and included several stages, such as education, mentoring and shadowing.”Appropriate will and trusts are essential to help avoid potential family disputes created by poor planning,” he said.

Seek help

Whatever the type of transaction, Curran advises business owners to meet with professionals such as attorneys, financial advisers and accountants rather than trying to handle it by themselves. The process typically takes a team of professionals, he said.

“The most important thing to have is one of those advisers as a quarterback who coordinates all the others,” he said. “You really need a single point of contact. If they’re trying to coordinate with all these team members, often times they’ll get frustrated and put it on the back burner.”

Letting go

While some business owners dream of leaving the business to spend their days sipping tropical drinks on a beach somewhere, others simply can’t let go. Instead, they will remain involved in the business in a lesser role, such as a part-time employee or an adviser.

“The intrinsic rewards to building a successful business are simply too rewarding to abruptly retire,” Miller said. “Successful people tend to be programmed toward accomplishment and purpose. Therefore, continuing as a consultant, coupled with giving back and then volunteering, is and ideal scenario for many. And certainly there are some who have sacrificed greatly throughout their careers, and now is their time to enjoy the fruits of their labor and time with their families.”Other business owners might have invested so much time into the business that they don’t know anything else, and find the retired lifestyle difficult, Curran said. That’s very common, especially with first-generation business owners, he said.”Typically a second- or third-generation business owner will have more of a social life,” he said. “But for the first generation who built the business, that’s their baby. They truly identify themselves with that business, and it’s a different dynamic to deal with than with a second- or third-generation owner. It’s a much more emotional process.”

This is an article from the Reading Eagle/Tuesday December 22, 2015. Written by Brad Rhen, Money Reporter, Reading Eagle.
http://www.readingeagle.com/business-weekly/article/advisers-help-business-owners-develop-an-exit-strategy
Contact Brad Rhen: 610-371-5047 or brhen@readingeagle.com.