Burnout, especially for business owners, can have a lasting impact on your business in more ways than you think.
Here at Consolidated Planning, our decades-long journey has helped us navigate countless business owner cases and avoid unforeseen disruptions and conflicts.
In what follows, we’ll help you understand the risk burnout poses to your saleability and how you can begin planning for your exit, all to prepare you to sell when the time is right. Whenever that option may arise. Burnout not included.
What Does Burnout Look Like As A Business Owner?
Imagine going to work at the business you’ve poured so much time and energy into building and not wanting to be there. Scary, right?
Along with this feeling often comes the eagerness or anticipation of wanting to sell your business…tomorrow. But, wanting to sell your business tomorrow can be indicative of a problem within your business to outsiders. A problem like a failing business. Regardless if that is true or not, perception is often reality in the instance.
Aside from the stressors associated without burnout comes the toll that burnout can have on the ultimate “salability” of your business. The saleability of your business is the ability for something to be sold…easily.
A business owner coming from a state of burnout is actually at a position of weakness when it comes to selling the business and it becomes evident to potential buyers and competitors.
Burnout Affects Your Saleability As A Business Owner
Selling your business regardless of the structure is a huge undertaking that requires a solid transition plan with business continuity at the forefront. When you can approach perhaps the biggest transaction of your lifetime from a position of strength you are able to:
- Secure a strong buyer
- Maximize and retain your business value, and
- Ensure a smooth transition for your employees, new owner, and your post-lifestyle income requirements
Planning Ahead Gives You Options For The Exit Of Your Business
Just like with most things in life, you want to quit while you’re ahead, if you will. And the same is true for exiting your business. Ideally, you want to exit your business on your own terms, or at least terms that you had a hand in arranging.
Actively planning for the exit of your business BEFORE the feeling of burnout ensues is essential to having the most options at your fingertips. And options give you an upper hand.
Here are three areas in which you can begin planning for today:
#1 Assessing Your Personal Balance Sheet
Your personal balance sheet and your business balance sheet are intimately linked. Your personal balance sheet helps you better understand:
- Your financial needs and goals
- Future income requirements
- Your debts and liabilities, and
- Tax planning and savings
The main objective is to identify what type of “gap” exists between your balance sheet’s ability to generate the income necessary for you to have a GREAT LIFE in retirement and what would need to be covered through the sale of a business.
#2 Determining An Inside Sale/Transfer vs. Outside Sale
If you have key employees, which we hope you do, or family members who you’d like to succeed you in ownership there are several internal strategies to make this process go more smoothly. And when it comes to your business, you know that things going smoothly is always welcomed.
These strategies include:
- Reducing the buyer’s tax burden
- Establishing direct payments to the exiting owners, and
- Gifting
Every owner will exit their business, but the path to that exit is based on what works best for your unique position. Because of varying exit paths, starting this journey sooner than later proves to boast more options, a stronger sale price, and the necessary funds for your post-retirement lifestyle.
#3 Securing Your Key Employee(s)
Regardless of your desired path for exiting your business, inside sale or third party sale, your employees play a huge role here. The people part of the equation is indeed the most valuable part of your business.
Think about those long-term employees you have – and now think about how self-sufficient they are and all the knowledge that comes along with that.
What would happen if a key employee or key employee group exits before the sale of your business? Ideally, each key employee should be retained with a meaningful carrot not until the sale, but ideally 3 years beyond the sale. This “carrot” of money, if you will, should be a lump sum when paid 3 or more years after the sale. For example, it’s better for the business to withhold a meaningful carrot of 80k as a lump sum in 8 years from now, 3 years after the probable exit, then to provide that same employee with 10k a year for 8 years.
When the carrot is all or nothing, employees typically stay until the very end.
Now, let’s take that a step further. Imagine trying to replace this employee AND selling your business.
Securing your key employee(s) is a huge step forward in securing the future of your business. Whether it be for setting up an Employee Stock Ownership Plan (ESOP) or Retention Plans to keep these folks in your business during this transition and in many cases, beyond the transfer of ownership.
Prepare For The Exit Of Your Business For When The Time Is Right
The best exit strategy is one that you’ve planned for.
And oftentimes, business owners who go through the process of understanding what it takes to sell their business, realize they are able to retire far sooner than they had ever imagined. And what’s even better, they typically realize they can sell for more than they originally thought. Sounds great, doesn’t it?
While it might seem counterintuitive to start planning for the exit of your business while things are going great, that’s actually the best time to do so.
To understand what your options to sell might look like, chat with an experienced business professional at Consolidated Planning today.
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Exp. 1/2027
Guardian, its subsidiaries, agents and employees do not provide tax, legal, or accounting advice. Consult your tax, legal, or accounting professional regarding your individual situation. The information provided is based on our general understanding of the subject matter discussed and is for informational purposes only.
This material contains the current opinions of Mike Dare and Consolidated Planning only. These are not the opinions of Park Avenue Securities, Guardian, or its subsidiaries.
