Business Succession Planning: How Far In Advance Should You Begin?

Thinking About Selling Your Business? Here’s When You Should Start Planning

Most small business owners don’t start their own business so they can work in it forever. In order to make their business successful, most entrepreneurs just put their head down and grind. Unfortunately, when they finally come up for air and decide they want to retire, they realize they haven’t spent any time figuring out how they’re going to retire.

There’s a lot that goes into business succession planning. Between figuring out how much your business is worth, finding a buyer, agreeing on the terms of sale, and a million other things – it cannot be done overnight. In a recent Barron’s article, six wealth managers highlighted the most common mistakes when selling a business. The common theme? Waiting too long to start planning.

So When Should You Start Business Succession Planning?

There’s no magic bullet here for every business. Depending on a number of factors, the time in which you should begin succession planning can vary. I recently had lunch with colleague of mine who works in private wealth for Bank of America. His team specializes in helping high-net-worth individuals (many business owners) with their retirement/succession planning. His rule of thumb is that 2 years is the absolute minimum if you want to ensure a timely retirement and to make sure you get a fair value for your business.

“In a perfect world, 5-7 years is when we like to get started”, he said. The reason being is that selling your business impacts more than just what your day-to-day looks like. It has tax-implications, estate planning changes, and an impact on your overall retirement planning. Because of that, the sooner you can get started, the better.

What Does This Have To Do With Insurance?

If you’re curious about what the hell this has to do with an insurance agent, you have every right to be! As an agent and insurance partner to the business, there’s a lot of ways I can help in that transition. Selfishly, I want to make sure that there’s a business still around for me to ensure and I want to be able to help new ownership transition into managing the insurance as much  as possible. Also, life insurance plays a crucial role in protecting the sellers asset in the event that something happens to the buyer.

If you want to learn more about how we can help you start the process of planning for your retirement, feel free to contact us here. I would be happy to introduce you to any of the advisors we work with who can help along the way!