Business owners may have a specific timeline in mind for selling, but an opportunity could come sooner than expected. Understanding whether the proceeds can support your retirement and lifestyle can help you decide if the offer is worth considering.
Read the full transcript
AJ, oftentimes business owners plan to sell their business at a time that is personally relevant to them. For example, when they want to retire or when one of their children can take over. Is this the best approach?
That’s a good question. I don’t think it’s the best approach, no. I can certainly understand and sympathize why waiting to sell your business, especially if it’s a family business, why you’d wait to sell it until your kids are working age and could reasonably run the company.
But the reality is, no matter how much planning you’ve done, there’s still a million different things that can happen. Your kids may not want to run the business. They just may not know yet. And so, if somebody makes you an offer, I think there’s certainly a lot of risk in not entertaining it because there’s no guarantee that that offer is going to be there in the future, five or 10 years from now.
So, our role as planners and working with business owners really comes down to figuring out, if somebody makes you an offer, is it acceptable? Can the amount of money after taxes, can this reasonably fund your retirement and your lifestyle to the point where you don’t need the cash flow from this business anymore?
So, our role as a planning team is to help our clients make sure the proceeds of a sale will fund their personal needs no matter when they sell their business.
That’s exactly right.