Being in business with your family could get tricky. For example, a recent study showed that two thirds of small business owners plan on passing their business down from one generation to the next. Yet, of those respondents, only 18% had a business succession plan that was clearly documented and communicated within the business.
There are two main reasons why business owners fail to plan for the future. The first is that they literally don’t think that they can afford to retire. 37% of respondents said that they didn’t think that they could afford to retire from their business. And we all know that cash flow is the lifeblood to any business. So it makes sense if you don’t have the cash flow to try to avoid it. But what if there was a way to find that cash flow within your current expenses to fund this planning?
If you’ve worked for the last 30 or 40 years, building your business, the last thing you want to do is strap the business with payments for retirement plan for you. But at the same time, you’ve put your blood, sweat and tears into this business for the last 30 or 40 years. You deserve to use that business for retirement. So it’s a double edged sword.
The second reason that business owners fail to plan for their succession is, they don’t want to let go. Statistically, business owners retire later than their employees and later than the average American. On average, a business owner retires at age 72 versus 66 for their employees and 64 for the average American.
If you think about it, it makes sense, though. A lot of times when people start a small business, the reason why or one of the main reasons why is because they want to be in control. They want to be in control of their own destiny and their livelihood. So the very thought of giving up control can cause stress and anxiety for the business owner who’s been in control for 30 or 40 years.
However, holding on for too long can have some negative side effects. When a business owner stays on too long, there are three negative effects. Number one, it can slow the growth of the company. Number two, it can limit your successors. People aren’t going to wait around forever before you decide to retire. Additionally, they’re not going to put their heart and soul into growing the business if it’s only helping you and not benefiting them. And third, it can literally bankrupt the business. And think of this. Business failures have increased by 226% over the past decade.
Our specialty is helping business owners plan a strategy to set them up for retirement success, as well as set the next generation up for success within the business. We do it in three steps. First, we show you how to regain control of your cash flow so that you can utilize that cash flow to help fund your exit strategy without taking away from the viability of the business.
Secondly, we can help you to incentivize key personnel to stay on, to help you to grow the business and fund your retirement without bankrupting the business. And more importantly, these plans could help incentivize key personnel to maintain their production, help grow the business, but also provide them with meaningful benefits to secure their financial future. And number three, we’ll help facilitate the difficult conversations that have to be made between family members and key people so that everybody’s on the same page and everybody’s pulling in the right direction.
The bottom line is this: with proper planning, business succession can go smoothly. It could take care of the founding generation and generations to come. If you take care of the business, the business will take care of you.
And remember, it’s not how much money you make. It’s how much money you keep that really matters.