Your Business: Will It Have A Happy Ending?

"Begin with the end in mind," says Stephen Covey in his book Seven Habits of Successful Living. Those who have created a successful business know it does not happen without planning, hard work, and a little luck. Yet most have no plans for leaving their business, ever.

Entrepreneurs are optimists, but all of us will stop work one day. The truth is that most business relationships do not have a happy ending. The question is: Will it happen as I want or will it just happen?

Research in the UK indicates that 75 percent of small to medium-sized businesses have no exit strategy. In Canada, 92 percent of entrepreneurs say it is a good idea to have an exit strategy, but only 44 percent actually have one. In the US, more than 20 percent of small industrial business owners had not even thought about exiting their businesses. Even professionals like physicians, dentists, and veterinarians are ill prepared for exiting their practices. A survey of this group indicated that 96 percent believed that poor planning left them unable to exit their businesses on their own schedule.

Life shows us that we have to depend on ourselves. Yet we continue to believe someone else will someday take care of us. We will live on Social Security and income from the business that we created. The idea that your business will strive on to provide you income after you are no longer there is to believe that you have money in a Social Security account. Your company will not work for you after you are gone and there is no money in your account with Social Security. Still, we believe. It is time to look at reality.

You will leave your business in one of four ways. I call it the "The Four Ds of Leaving:" death, disability, divorce and departing. To have a successful business, you must plan for all Four Ds.

For the individual each one of the Four Ds has special demands on family, income, taxes and transfer of control of assets. The concern of the business is different. Your business is a separate entity and your concerns for family and income will conflict with the business desire to continue. The solution to the problem is mutually fair agreements and enough money.

Fair agreements that take in the concerns of all parties negotiated at the beginning of a business relationship will allow the participants to handle transitions when relationships change. And relationships will change. The agreements, commonly called buy/sell agreements, are used to handle the Four Ds. Unfortunately, many buy/sell agreements only address death at the urging of a life insurance agent. At the meeting, you arbitrarily decide how much insurance you can afford and how much your company is worth, when in fact you do not know.

Death is not as likely to end the business relationship as disability. If the person is important to the business, the financial strain is felt as keenly by the business as by the family who depended on the income. If the business is faced with choosing between survival or paying the disabled partner, it will survive.

You can imagine the torn feelings if a disability occurs, but what if the partners cannot get along? How do we split a partnership without financially ruining each other? It may be complicated by many personalities, some may not even be a part of the dispute, yet may be affected financially.

You may all be happy working together, but your partner or you may decide to leave for another opportunity or simply to take life easier. Who is going to do the work? What is owed the leaving partner? Where is the money coming from?

A number of questions cannot be handled in this article, but there are certain things that must be done: - The business needs to be incorporated into a formal relationship that legally recognizes that you and your business are separate entities - Devise a method determining the value of the corporation that can be done at least annually and will qualify under IRS standards - Develop an employee benefit plan that will assist with the departure of each partner in case of death, disability, or retirement - Finally, if we cannot get along or simply want to leave, who gets the company and who gets paid off and in what manner? If you think these decisions are hard now, try to make them in the heat of the moment. You have to think as if you are the one who wants to leave as well as the one who wants to stay. It is not easy.

The "Great American Dream" is to create a business of your own; to bring it to life and make it successful, financially. A truly successful business is one that makes you financially independent. How you leave will determine your financial success and that of your family. Just as building a successful business takes planning, hard work, and a little luck, so does leaving it.

Brent Dees, CFP, CSA is president of Brent Dees Financial Planning, http://www.brentdees.com, and a coach to small business owners, teaching the Focus Four system of personal and business goal-setting.

---

Hunters and Gatherers - Are You Serving Both Their Needs?

The University of Exeter in the United Kingdom recently published... Read More

Shortening Product Life Cycle!

The current state of the available technology at the disposal... Read More

3 Ps of Planning - Prepare, Personalize, Pilot

Here's a really simple way to make sure your plans... Read More

Action Planning

ACTION PLANNING: Action Planning is a process to develop strategies... Read More

Top Reasons To Form A Strategic Business Alliance

A strategic alliance is when two or more businesses join... Read More

Own Your Niche by Building a Niche Community

In 1997, David Steele was making the transition from a... Read More

Breaking the Growth Barriers in the Information Technology and Software Sector

There's nothing automatic about corporate growth, particularly in the information... Read More

The Six Sigma Method and Design of Experiments

Six Sigma is becoming a proven approach for businesses and... Read More

Ten Steps To A Great Strategic Plan

Ask a small business owner about their strategic plan and... Read More

Business Plans Keep You On The Success Course

Where would your business be without a proper plan? A... Read More

Six Key Principles of Corporate Accountability

The foundation of any business transaction is the promise of... Read More

Microsoft Great Plains Implementation: Healthcare/Hospital example ? overview for consultant

Microsoft Great Plains fits multiple services market niche and healthcare... Read More

Invalid Excuses for Poor Business Results - Rising costs

Note to Northwest Airlines ? It's not about fuel costsFor... Read More

How to Develop a Successful Board of Advisors (...and Why You Should!)

In today's rapidly changing and highly competitive markets, many privately... Read More

Akron OH; A great place to do business

When looking at Akron carefully one cannot help but notice... Read More

Building a Better Brick-and-Mortar with the Billion-Dollar Web

More than $117 billion passed hands from Internet shoppers to... Read More

Troubled Waters Require Capable Leaders at the Helm

Canada's lean leaders need to look beyond the horizon and... Read More

Connecting Your Offline Business to Your Online Business

These may sound like no brainers, but you'd be surprised.... Read More

Sales Planning and Business Plans

Writing a business plan can be tricky when all the... Read More

Could You Be Setting Your Business Plan Up For Failure?

David E. Gumpert, author of Burn Your Business Plan, often... Read More

How to Write a Business Plan in Five Steps

People often ask "What makes a good business plan? Or,... Read More

A Backup To The Internet Is Vital & Now Cost Effective

It doesn't take a Terrorist Act, Tsunami or Earthquake to... Read More

City of Cortez and South Western Colorado Market Survey

We have been spending many hours surveying the market for... Read More

5 Strategies That Will Boost Your Business Productivity Today! - Part 2

Growing your own small business can be one of the... Read More

Memo: Sustaining Growth in Your Business

What gets measured gets done.How do you keep your business... Read More

Business Problem Solving

Is there really anything as a problem? Does chaos or... Read More

Business Disaster? Wont Happen to Me

As fast as you can say business disaster, your business... Read More

SWOT Analysis Is No Magic 8 Ball

Q: A key investor in my business has suggested that... Read More

Sony?s PSI Project

In 1989, Sony founded its Institute of Wisdom at the... Read More

Planning for Success

Business planning is widely acknowledged as one of the keys... Read More

How to Achieve E-commerce Success ?You Gotta Plan!

Before becoming a netpreneaur, I was an entrepreneur. First, I... Read More

How To Prepare A Business Plan That Guarantees Big Profits

It is always said "If you Fail to Plan, you... Read More

Elite Positioning Brings Higher Profits

Imagine spending the same amount of money on marketing and... Read More