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Professionals in the mergers and acquisitions (M&A) field deal with a lot of lost business owners who do not know what they want from a transition and just impulsively enter into a transaction. Most of those transactions fail, and even the ones that do succeed, often lead to regrets. That is why I strongly recommend advance planning. The Exit Planning process is very useful in helping to define your owner expectations. Exit Planning asks and answers all the business, personal, financial, legal and tax questions involved in selling a business. It is the umbrella strategy over Succession Planning, Value Enhancement, Estate Planning, and Tax Planning, among others. Business owners need the following four beliefs to successfully transition out of their business: 1. You will not live forever, and you must transition before the business fails or you become disabled or die. 2. It takes more effort to get out of business than it took to get into business. 3. At some point, it is better to turn your business into a less- risky, long-term investment than to continue to risk the financial future of your family. 4. Through the transition of your business, you have the power to either positively impact people and leave a legacy or negatively impact many people and create hardship for others. BELIEFS NEEDED TO BE READY TO TRANSITION #1 You will not live forever Rua Associates gives educational talks on transitioning out of a business, and at those talks, we ask business owners to tell us which one of the most common causes of business transition they expect to happen to them: 1. Business fails and must be liquidated 2. They become disabled, forcing liquidation of the business 3. A dispute between shareholders/partners or divorce/death of spouse forces liquidation 4. Their death causes business to be liquidated or quickly sold 5. They successfully transition out of their business and go into retirement The first major belief you must have is that you will not live forever and you must transition before options 1-3 happen to you. #2 Exiting your business is harder than starting it The second major belief that you must have is that it takes as much, if not more, effort to get out of business than it took to get into business. The transaction success rate is directly proportional to the amount of preparation that is put into the transaction process. #3 Turning your business into a less-risky, long-term investment As you enter into your later years in life, you need to have less-risky investments that you can count on when your potential to earn more income is diminished. Also, less-risky investments provide peace of mind, so you can do other things without worrying about managing your investment. The third belief is that as you near retirement age, it is better to turn your business investment into a less-risky, long-term investment. Not doing so is risking your family's money. #4 Leaving a positive legacy This brings us to the fourth belief that owners must have, which is that they have the power through the transition of their business to either positively or negatively impact many people. A business affects the lives of the owner and the owner's family, the employees and their families, vendors, customers, and the community where the business is located. We know small businesses are the backbone of our economy. We know when successful businesses are created, it provides opportunity for more people, and when they fail, it creates hardship for many. The impact a business transition can have on so many people is called the "ripple effect." EXIT PLANNING Exit Planning is the creation of a comprehensive roadmap to allow a business owner to successfully transition a privately held business. An Exit Plan asks and answers all of the business, personal, financial, legal and tax questions involved in the transition of a privately owned business. Some of the benefits of Exit Planning include: You are in control of when and how you exit You are ready when an opportunity presents itself You maximize what you put in your pocket You save on unnecessary expenses and taxes You beat the 95-percent failure rate You can tell your family and employees you have a plan You will not be as stressed during the selling process 24 JANUARY 2016 OUTDOOR POWER EQUIPMENT www.outdoorpowerequipment.com FEATURE STORY | Wealth Management â– BY RANDY RUA It takes more effort to get out of business than it took to get into business. How to start successfully transitioning your business