Have you ever gone to a café or restaurant and, out of all the seats available, ended up on the dreaded wobbly stool? No one likes it—and for good reason. Balance matters. That same principle applies when considering life beyond your business.
For business owners, the stool has three legs: personal, financial, and business. Each leg must be strong and in alignment with the others. If one is weak or neglected, the entire structure becomes unstable. Achieving balance across all three is the key to a successful transition and fulfilling retirement.
The Personal Leg
This leg is all about your life after the business. Who will you be when you’re no longer working 60 hours a week? Shockingly, about 75 percent of business owners regret selling their business just 12 months after the fact,* often because they never considered how to fill the emotional and time void that follows.
Planning ahead can help guide your quality of life when the time comes. Ask yourself: How will you spend your time? What role will family, friends, health, and recreation play? How will your charitable, religious, or spiritual values guide you?
The Financial Leg
How will you fund your post-exit lifestyle? This is where the financial leg comes in—it provides the resources to support your future. Consider: For many owners, the business is their largest asset. Do you know its current value? Do you know how much you’ll need, after taxes, to support your retirement lifestyle? What other assets or income sources will contribute to your retirement? Do you have personal investments or a retirement plan through the company? What is your risk profile, and how does that impact your investment and income strategies? Are you properly insured against unexpected events—both personally and within the business?
The Business Leg
This leg is about transferability and legacy. Key questions to consider: Is your business attractive and transferable to a buyer? In our summer article and recent video blog, we introduced the concept of being a “Lifestyle Business Owner or a Value Creator.” Who will you transition your business to—family member, current employee(s), or external buyer? Each option comes with unique considerations. Do you want the business to continue after you’re gone? What will happen to your employees and the culture you’ve worked hard to build?
Wealth means different things to different people. For some, it’s the personal leg—good health and the freedom to spend time with loved ones. For others, it’s the financial leg—maximizing value to provide lasting security. For many, it’s the business leg—ensuring your business thrives into a second, and even third generation while providing for your employees.
Whatever your definition of wealth, the lesson remains the same—alignment across all three legs is essential. With proper planning, years before your exit, you should be able to step confidently into your future, without the risk of sitting on a wobbly stool.
*Source: Christopher M. Snider’s Walking to Destiny.
Investment advice offered by investment advisor representatives through Fragasso Financial Advisors, a registered investment advisor.
For more information, download Fragasso’s Exit Planning handbook at fragassoadvisors.com/exit/