My phone buzzes on the nightstand. I hate that thing sometimes. I look over and am surprised to see that it’s my son, Brendan, 25, texting me way past my bedtime from his Western Timezone. I grab the phone and slide open the message.
“Kobe retiring,” it says. I yawn. Definitely not a necessary text at 10PM.
“That’s what happens when you get old,” I reply. I’m awake so I do a quick google search and see that “old” NBA basketball player Kobe Bryant is… only 37. Yikes. I won’t say how old that makes me, but I can’t imagine what it would be like to retire at 37.
“He announced it via poem…” says Brendan. He includes the link (1). I save it for later and my head hits the pillow.
Now, none of my clients are professional athletes, and most won’t announce their retirement with a poem, but all of them worry about how they will eventually leave the workforce. For those who own a company, there’s the added pressure of planning for that business beyond their retirement. In a recent meeting, I asked a client (let’s call him Bill) for his vision for his company over the next three to five years. Specifically, I asked if Bill has an “exit strategy” that will provide him retirement income, protect his family and employees, and preserve the legacy Bill invested so much sweat and energy to create. Bill gave me a blank stare. As a small business owner myself, I can understand why.
John M. Leonetti, author of Exiting Your Business, Protecting Your Wealth, says, “Most owners do not have an exit strategy in place because people who run businesses tend to focus a majority of their efforts on being in the game or competing in their industry…[They] understand the logic of planning for an exit, but typically put it off to some unknown point in the future” (2). The task of planning your departure from your business can feel daunting and overwhelming. Like many of my clients, I am a small business owner. My last name is even in the title. As my children were growing up, I joked about who was going to take over the business when I retired. My jokes were left with blank responses. Truthfully, I’m happy to see my children following careers that interest them. For me, it became clear I needed to look outside the family to build a succession plan that best served the company and most importantly, our clients.
Likewise, Bill and I started a process that will provide him with an independent evaluation of his company and a list of strategies to implement to make a sale viable. Based on my 29 years of experience working as a CPA and CFP®, I find that the first step in this process is identifying what the business is really worth and what the client needs from the business to ensure a comfortable retirement. With this information, Bill can begin to consider all of the sale alternatives. I’ll go into these in more detail in my next post, but for our purposes here, they include the following options:
- Internal management buyout
- Formal search for a strategic buyer
- Private equity
- Transfer to the next generation
- Growth capital for business expansion
The process wasn’t as hard as Bill imagined once we jumped the mental barrier of the “exit strategy.” The information was available, and the client just needed our team to coordinate his existing advisors to help get the job done.
Kobe will play to the end of this NBA season in April, stretching his public exit strategy to five months. For you and your company, your strategy may be ingrained in your business for the next few decades to ensure you leave at the right time in the best possible situation. As John M. Leonetti says, “For a mature company, the sooner a plan is put in place, the better prepared an owner will be when an exit is available, both personally and professionally.”
Clients work with us because we don’t sell products – we create customized plans based on each client’s unique goals and we continuously reevaluate client plans to ensure they are aligned with changing needs. Our clients rely on us to protect their futures, and we take their trust to heart.