By Brian Bloxom, ChFEBCSM
Running a business takes so much focus that planning how you’ll eventually leave it often gets pushed to the bottom of the list. After all, when you’re busy running the day-to-day, planning an exit can feel premature or even uncomfortable.
The surprising truth: the right time to start thinking about succession planning is almost always earlier than you expect.
Why does timing matter so much? Research shows that nearly 75% of business owners experience some form of regret within a year of selling their business. And that regret usually isn’t about selling, but how the transition happened.
In many cases, owners realize they didn’t give themselves enough time to prepare. That can mean missed opportunities to reduce taxes, increase the value of the business, or structure the exit in a way that truly reflects the years of effort they put in.
Others are forced into selling due to unexpected life events, leaving little room to control the timing or terms. And sometimes a business is profitable but not buyer-ready, too dependent on the owner, lacking a leadership bench, or missing a clear succession plan.
We also see owners who wish they had explored options earlier, whether that meant transitioning ownership to family members, key employees, or setting up a gradual exit that aligned better with their personal goals.
In our work with entrepreneurs, we consistently see better outcomes when selling a business is approached proactively, not reactively. With that in mind, here are several succession planning strategies we often recommend to help business owners get ahead of the curve and exit on their own terms.
Envision the Future
What will be the legacy of the business you leave behind? Who will carry on your vision? These and many other questions—especially those that address your role (if any) in the business afterward—should be carefully considered. Imagine what the business will look like in five or ten years after you’re no longer there. Setting the foundation for this vision should be the first step.
Prepare for the Unexpected
Business owners know all too well that unexpected events can derail even the best-laid plans, so carry this tenet into planning for your business’s future. Illness or serious accidents late in life can not only affect the day-day operations if you’re not there, but the value of the business to potential buyers as well. You don’t want circumstances and tragedy to dictate the terms and conditions of your exit, so be sure to put contingency plans in place.
Develop a Succession Plan Long Before You Need It
This is especially true if you plan on transitioning your business to family members or key employees. Employees, customers, and vendors will all need assurance the business can run well with your successors, and this trust takes time. You also want to have confidence ahead of time that those who lead the business after you have the strengths and skills to continue your success.
Integrate Your Exit With Your Personal Financial Plan
The Exit Planning Readiness Survey states that 80-90 percent of an average entrepreneur’s wealth was locked up on their business. When the exit and sale occurs, this could result in more liquid wealth than the owner has ever possessed at one time. What then?
Being prepared for this sudden wealth realization and incorporating this windfall into a thoughtful, carefully crafted financial and retirement plan is essential for every business owner. Without such a plan, which includes personal estate planning as well, retired entrepreneurs may feel overwhelmed and at a loss—having now relinquished their life’s work and deciding how to best reinvest or allocate the proceeds of their business sale. This is at the heart of what Sentinel Wealth Partners provides to our business-owner clients.
Reinvent Yourself
As business owners ourselves, we know all too well that running an enterprise is all-consuming and it may be difficult to simply turn off that motivation and inner drive once the purchase agreement is signed and sealed. In our experience, retired entrepreneurs often need to turn their still-considerable energies toward other endeavors. This can include charitable or volunteer work or devoting time to long-awaited hobbies or time with family and loved ones. Think about your new life and sense of purpose and lay a foundation ahead of time for your legacy and what’s meaningful to you.
Don’t Be a One-Person Show: Assemble Your Team
Many entrepreneurs relish the idea of independence and being a self-made success. After all, you may have been the captain of your business ship most of your adult life. But when it comes to business transitions, assemble a team of experts to counsel and guide you through this process. This includes financial advisors, tax professionals, and qualified attorneys.
Thinking About Selling Your Business? Start the Discussion Today
Selling your business is a major milestone, and for many entrepreneurs, the thought of stepping away can bring equal parts excitement and stress. Starting succession planning early and having a clear transition strategy can remove the pressure and help preserve the value and legacy you’ve tirelessly built.
At Sentinel Wealth Partners, we work alongside business owners to make selling a business feel more intentional and less overwhelming. When you’re ready to talk through next steps, we’re here to help. Reach out to us today by calling our office at 703-832-0164, sending an email to brian@sentinelwealthpartners.com, or using our online calendar.
About Brian
Brian Bloxom is an Independent Financial Advisor, Chartered Federal Employee Benefits ConsultantSM (ChFEBCSM) and Chartered Retirement Planning Counselor℠, CRPC® professional now celebrating 30-plus years in business. He founded Sentinel Wealth Partners to serve retirees, individuals approaching retirement, and individuals managing complex retirement plans such as company plans or federal benefits plans. His expertise and dedication to helping his clients achieve their goals make him a trusted resource that will help you feel confident in your customized retirement plan. Brian’s mission is to be available to his clients—all the time. He’s here to solve your problems, relieve your anxiety, and give you optimism for retirement. Because ultimately, your retirement should be about well-deserved enjoyment, and not about stress or anxiety.
Brian has also been serving as the President of the Salvation Army Advisory Council in his area for the last five years. In his free time, you can find him spending time with his wife, Jessica, and their two sons, Spencer and Preston. In addition to being actively involved in recreation sports coaching for kids, he enjoys serving in his community, golfing, and relaxing at his vacation home at Lake Anna, VA. To learn more about Brian, connect with him on LinkedIn.
Securities offered through Registered Representatives of Cambridge Investment Research, Inc., a broker-dealer, member FINRA/SIPC. Advisory services offered through Cambridge Investment Research Advisors, Inc., a Registered Investment Adviser. Sentinel Wealth Partners and Cambridge are not affiliated. Sentinel Wealth Partners is not engaged in the securities business. Cambridge does not offer tax or legal advice.