The One Thing Business Owners Can't Afford to Ignore During an Exit

At the October meeting of my local Exit Planning Institute chapter , someone raised this question: Why don’t more business owners engage wealth managers long before they begin the process of exiting the business??

Some possibilities that were presented included lack of education about financial markets and how they work, or maybe they just don’t want to pay the advisory fees for the services a wealth manager provides.?

One attendee suggested that perhaps the business owner looks at an investment portfolio earning 6–8% per year and asks: Why would I do that when my margins in the business are 15% (or 20%, or 25%)??

It is possible a business owner weighs the relatively modest return of a “boring” investment portfolio against the returns available through the business. ?

But if that’s the case, the owner overlooks one very important factor: risk.?

Why does a business pay an owner such high returns on his or her investment? Because the owner bears a lot of risk in running a business. ALL of the risk. ?

There was risk at the start of the business, and there is always some kind of risk that can knock the business off course, even a well-run and growing business.?

Risk is guaranteed. Returns are not.?

After the liquidity event of selling a business, a (now former) owner does not need to take risk. And low risk means low returns, comparatively speaking. That is a good thing for the owner.?

That reduction in risk carries tremendous emotional value that cannot be measured in dollars.?

Yes, a good wealth manager can provide guidance and advice on all sorts of personal and business-related matters, including estate planning, tax planning, charitable giving and more. Even more important for business owners, a wealth manager can run the numbers to answer the all-important question: How much does an owner need to live out his or her dreams after exiting the business??

A wealth manager can also show an owner how living with less day-to-day risk is actually a very good thing that can support a successful transition to the next phase in the owner’s life.