For some, planning a business exit can be a predictable, methodical process. We know the competition; we understand market demands, know when we want to sell and might even know the actual date. But for far too many business owners, the business exit comes as a harsh reality and often unplanned event.
Protecting your business and assets against the dreaded six D's of an unplanned business exit can give whole new meaning to the term ?Disaster Management?. While every business may experience unexpected pitfalls, careful planning to ensure risk exposure is minimized can assist in keeping you in the driver's seat when it comes to managing your company. Familiarize yourself with the six D's of an unplanned business exit: debt, death, disability, divorce, departure and disaster. Know the enemy and look to address all six D's in your operating and buy / sell agreements.
The Six D's of an Unplanned Business Exit
Debt:No one goes into business and plans on it not succeeding, but 40,000 businesses fail every month in the United States. When debt exceeds revenue, it is critical to exit timely in order to minimize loses. Understanding limitations and protecting critical assets are key to successful divesture.
Death:Many businesses are solely dependant on their owner's abilities, relationships, and passion to drive success, and when there is a death of an owner or partner of a business, it can have significant impact to a business almost immediately. While no one wants to consider their own demise, the strength and longevity of a business relies on being able to plan for such a critical loss even if it means downsizing or reorganization. The survival of a business in relation to key individuals needs to be evaluated and exit strategies planned accordingly.
Disability:Unbelievably, death is not as likely to end the business as a disability. A disability to a business partner can put a significant drain on cash flow, daily workloads, and excess down time, all of which can be devastating. Insurance and financial planning towards alleviating such an impact needs to be carefully evaluated especially when dealing with small business start ups where funding and resources are limited.
Divorce:No one wants to plan for a business or personal divorce, yet while Pre-nuptial agreements may be gaining in popularity many people never look to manage such impact to their businesses. What happens when the partners cannot get along? Or worse, you inherit another partner due to a personal divorce settlement? Exiting the business might be the only alternative you are provided.
Departure:It does not sound as bad as death, but it can wreak the same results. A partner, key employees, or other resources decide to go to the competition, retire, burn out, or win the lotto. When they leave, how does this impact your business going forward?
Disaster:If the five D's above where not enough to impact your business, there are no limit to the other disasters that may occur that were never planned on: robbery, sickness, employee theft, employee turnover, natural devastating events, etc. In today's post Katrina, 911 world the impact of the chaos theory is enough to keep even the best business minds awake at night. Plan for the worst; strive for the best and know when to get out if need be.
For the typical business owner, each one of the six D's has special demands on the family, income, taxes, and control of assets. An agreement, commonly called buy/sell agreements, can be used to plan for the impact associated with the dreaded six D's. A successful sustaining business exists as a separate entity from personal concerns and risk can be reduced by developing mutually fair and equitable agreements prior to these events occurring.
Business is an evolution and travels a diverse path. While some may look on an unplanned exit as a failure others may see an opportunity for growth and freedom.
-Go to school -Get an education -Learn occupational skills and expertise -Get a good job -Earn a paycheck -Retire
This is a formula that has worked very well to create a workforce of lifelong workers. It accomplished the goal of supplying a workforce very well. But it does little to prepare for the end of that life cycle. This formula is very good at producing job-dependence, but not so good at producing a financially independent society.
The proof of this is in the statistics. By retirement age, 96% of the population in countries like Australia is not financially stable enough to stop working and live in comfort without depending on others. In the U.S., almost 25 percent of those who've reached retirement age are still working (of those aged 65 to 74).
There is a very simple reason why this is the case. The reason is that traditional educations do very little (if anything) to educate students in wealth creation. Beyond retirement accounts and pensions, the average man or woman has very little knowledge about investing and creating wealth. Worse still, a traditional education does noting to instill a mindset of financial success in an individual, and so even those who may understand something of the financial systems of the world often fail to create lasting streams of wealth that can see them through retirement.
While a good wealth creation strategy could do wonders for the working class in terms of retiring at retirement age, it could do more to move that age up dramatically, so that more of life could be enjoyed in the younger years. Wealth creation exit strategies are not only for the retiring, they are for all who would hope to leave the working world and enjoy more control over their life.
A wealth creation education goes beyond that of a traditional education. An education in wealth creation teaches
-The mindset needed to live well and live wealthy -The attitude towards money and wealth that is necessary to embrace money as good and not evil -The financial strategies (financial intelligence) necessary to utilize the world's financial systems to build streams of income (what is referred to as putting money to work for you)
A financial exit strategy, which is what is learned from a wealth creation education, is the means to exiting the working world for good, at any age. It is the one reliable way to create wealth that can last a lifetime.
Wealth creation is the exit strategy that allows people to create the level of financial freedom necessary to live a life in charge. Through wealth creation, any person can gain the financial stability that will ensure that he or she will be able to enjoy a life free from the cycle of the working life.
Both Wbyb & Sean Rasmussen are contributors for EditorialToday. The above articles have been edited for relevancy and timeliness. All write-ups, reviews, tips and guides published by EditorialToday.com and its partners or affiliates are for informational purposes only. They should not be used for any legal or any other type of advice. We do not endorse any author, contributor, writer or article posted by our team.
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