Navigating the 5 D's of Unplanned Business Exits
Rick Bailey, JD MAcc CFP?
WEALTH ADVISOR | ADVANCED PLANNING CONSULTANT | FOUNDER
Helping Business Clients Plan for a Smooth Transition
?It's a stark reality: every business owner will eventually exit their business. With 50% of business transitions being involuntary and forced, the urgency to prepare cannot be overstated. Astonishingly, 80-90% of a business owner's wealth is often tied up in their company, yet 60% are unaware of their exit options. Even more concerning, 80% haven't formed a transition advisory team, leading to 75% experiencing profound regret just a year after selling. With 40% of owners aiming to sell in the next five years, the need for guidance is immediate.
The 5 D's of Unplanned Business Exits
?
Death: The passing of a partner can leave a business in limbo. Questions like, "What happens in a 50/50 partnership after a death?" and "How do we pay for the deceased partner’s ownership interest, or do we even have to?" are crucial. Planning can mitigate these challenges.
?Disability: Often more impactful than death, disability can significantly affect business operations. If a partner becomes physically or mentally incapacitated, addressing issues like salary continuation and profit allocation is essential. Remember, disability impacts not just the individual but the entire business structure.
?Divorce: Particularly in community property states, divorce can complicate business ownership. The prospect of an ex-spouse becoming a forced partner can devalue the business. Early planning can prevent these complexities.
?Disagreement: Internal conflicts can be catastrophic, potentially driving a thriving business to bankruptcy. Effective conflict resolution mechanisms are a must to avoid such pitfalls.
?Distress: Real-world events like the COVID-19 pandemic have highlighted the impacts of financial distress. Questions about capital infusion, partner contributions, and voting rights become critical during such times.
领英推荐
?Protecting Business Value: The Path Forward
The good news is that these problems are solvable with the right tools and planning. Proactive measures can not only safeguard your client’s business but also ensure a smoother transition, whether it's planned or unplanned.
?
Our Commitment to Your Success
Our advisory team is equipped with the expertise and tools to guide you through these challenges. We believe in proactive engagement to protect the value of your business and ensure a transition that aligns with your goals and aspirations. Advisors share the urgency that the time to plan is now. Let's work together to help your clients secure their legacy and the future of their business.
?If you would like to explore some complimentary resources, we have available for insurance agents and financial advisors in the advanced markets, simply click here:?
?