The Sad Truth Behind Exit Planning

Eunicia Peret

The Sad Truth Behind Exit Planning

By Eunicia Peret, CEO and Founder of the Empowered Financial Planner

Why is it that most business owners don’t think about exit planning until it’s too late?

The reality is that most people don’t have a succession plan in place, nor have they given any thought to how they will exit their business. This can be a huge mistake, as it can put them in a position of settling with much less than if they had had a strategic and flexible plan in place.

Exit planning is a vital aspect for all businesses, and it is especially critical for small businesses and individual business owners. One of the reasons is the fact that small businesses typically don’t have the same resources or access to expert support that larger companies have. Yet, the changes a smaller business owner can put in place make a world of difference in how much more they are able to keep in their pocket.

Some of the key issues we see with exit planning include limited access to capital, lack of strategic tax minimization planning, and very importantly, an inability to separate the owner’s financial outlook from that of the company’s financial position.

How many times have we heard of business owners trying to obtain funding without success, despite countless attempts and appeals to the traditional banking system? The list of reasons from the banks for a decline or approval for a remedial sum of money are often a mile long. That process is nothing short of tedious, frustrating, and many times feels like a shaming experience for the business owner. What we have found is that this should not be the case for entrepreneurs and business owners.

There are better options to gain access to capital, whether the goal is to focus on growth or to position the company for a sell-off. In either case, in the absence of access to capital, business owners are sometimes forced to choose between raising funds and potentially having to give part of their company away, and boot strapping in a way that may hinder faster growth. But what if there were alternative solutions? The truth is that not only do these solutions exist but more importantly, there are alternative ways to raise capital that can empower versus hinder the business owner.

The topic of strategic tax planning is a heavy one to unpack. Not because it is impossible to address but because there are so few experts who truly understand the difference between planning to file taxes and planning to strategically minimize the business owner’s tax bill using various areas of the tax code.

When it comes to focusing on minimizing taxes for the current tax year, there are many strategies that are part of the tax code. And yet, most people don’t know about them. Some may feel that they do not qualify, while others do not have access to proper advice, and others simply have no idea where to start or what may even be possible. Still other people may have experienced a sliver of what that tax planning may look like but stop there because they work with companies only focused on single solutions. We call those “one trick ponies,” and business owners who have experienced the difference between buying a one trick pony and a truly strategic way to optimize taxes know the difference.

The goal is not to avoid paying taxes, but instead the focus should be for the business owner to keep more of their hard-earned money so they can re-invest in the company, in the employees and in their efforts to grow. It is all about being strategic with the money that can be kept, versus given away.

On the other hand, many business owners have no idea that tax planning before receiving a letter of intent from a potential buyer is critical. As a result, many end up paying too much in taxes while other similar business owners get to enjoy the fruits of their labor by keeping more of the growth produced by the blood, sweat, and tears that went into building their company.

The inability to sometimes separate the owner’s financial outlook from that of the company is another major problem we see often. Business owners and entrepreneurs give it their all to build their dreams and so many find themselves realizing that a separation between personal wealth and business finances should have been there from the very beginning. Our hope is that more entrepreneurs and business owners realize this before it is too late or too costly to undo.

But how can one focus on both the personal and business finances when investing in the business seems to produce the best returns? The reality is that it is easier said than done, and it requires careful planning. It requires implementing a strategy and a team that can help execute it in a manner that will not have you as the business owner lose sleep at night. It requires a delicate balance that employs flexibility to account for both growth and potential tough times ahead.

Let’s not minimize the fact that planning for an exit strategy can be hard, and it can certainly feel overwhelming. The great news is that it doesn’t need to be.

It is imperative for entrepreneurs and business owners to ensure they have the right team in place to help them with exit planning. And while exit planning is often a long-term goal, the sooner the correct pieces are in place, the sooner the business owner will start benefiting from being more optimized with their taxes along with seeing their wealth grow faster and more strategically.

About Eunicia Peret

Eunicia is an accomplished wealth strategist and cash consultant with over 15 years of experience in the financial services industry.

She created the Wealth Freedom Formula, which is a customized hands-on financial consulting program offering end-to-end wealth optimization strategies that have historically only been leveraged by the ultra-wealthy. The tried-and-true personalized method has delivered significant bottom line improvements to hundreds of clients because it leverages a quarterback approach to ensure the client’s financial team is working in unison to minimize financial leakage.

Learn more: https://www.empoweredfinancialplanner.com/