A major challenge for a small business owner is selling their business for the right price and to the right purchaser.  However, in most cases we find that many business owners don’t spend the needed time to do this planning.  Consequently, they jeopardize the potential sale price.

Many small businesses will not be purchased from an outside purchaser, (about 5%), but the sale could come from either family members or inside employees of the business.

A 2003 study suggested that owners felt nine out of ten family owned business leaders thought their business will continue to be run by the same family or families in the next five years. [1]

You may have considered keeping the ownership of the business in the family and may have already gifted stock or sold stock to your children.  If this is the case, your planning should be more directed to other parts of the financial life, and possibly the role as a passive owner in the business.


The Four Life Changes Of A Business Owner!

What is it that you think about the most as a business owner?   Chances are they are one of four things:

  • What if I don’t want to stay in business and I want to drop out?
  • What if I get sick, disabled, or die?
  • What if my key person (s) decides to leave me?
  •  What if I can’t increase and improve my cash flow (life blood of the business), or the economy crashes?  

Besides running the day to day of the business, and the stress that goes with this, the four items listed above are probably the biggest stressful thoughts business owners have.   Let’s break them down.

Why the typical business owner thinks about these issues, is because they know they put a lot of sweat, tears, money, time  into their business.  They have most of their wealth in the business,  and know that they have no way of extracting that wealth when these events happen!

What if I don’t’ want to do this any longer and just want to drop out? 

Think about it!  The business owner has most of their wealth and time tied into this business.  In most cases it is very difficult to just stop doing what they are doing, lock the front door and leave the responsibility, wealth and reputation behind.  They still need their wealth in the business to maintain their life style.

Business owners are human beings and sometimes they just get tired of doing what they are doing, they burn out.   Sometimes they feel they are trapped and living a life of desperation.  They are making a nice living, and seeking to make a great life  for themselves and their families.  Chances are when they started the business they were only looking for a place to go, a position, a paycheck, and with a little luck a dream. The stress of running a business can take its toll on the businessman and the family.

They need the wealth they have invested, but don’t have a way of selling the business at a reasonable price.   Can the business be sold to an outsider?  Or, is there someone inside the company who will buy the business?  If so, do they have the money?  Is there someone who would run the business while the owner keeps their hands in the business?  Or, do they liquidate it?   Many times, even if a business owner sells their business, they find that after the taxes and expenses there’s not enough capital at a guaranteed rate of return to produce the income needed to keep the business owner and their family in the lifestyle they been used to. Because of this factor, more stress is added to the business owner and their future income. Continue reading “The Four Life Changes Of A Business Owner!”

The Small Issues Which Business Owners Need To Know About!

The Small Issues Which Business Owners Need To Know About!

When working with business owners, it is important to communicate many of the overlooked issues which may blindside them and cause disaster in their financial future.

Small issues turn into major problems bringing with them costly consequences. Many of them are obvious, and can be game changers in your future.

Whether you are an advisor or a business owner, some of the ideas I put forth will help you communicate these overlooked issues.

Estate Planning

I am sure if you asked 10 people to describe what estate planning is in one sentence, you would get 10 different answers.

At one time most advisors and business owners  would suggest that estate planning is about reducing taxes.  However, I would disagree that estate planning is just  about paying death taxes and mitigating estate costs.

To me, estate planning consists of three phases, creation, preservation, and distribution.  Each of the phases is distinct in and of themselves.

Creation is the concept of money, and accumulating.  Implementing strategies, which allow estate owners to create wealth, and avoid losing wealth by making financial mistakes.

Preservation is about protecting what you have from, inflation, lawsuits, expenses, and taxes. 

Distribution is the orderly distribution to your heirs.  It also is   a phase where the estate owner can distribute wealth to certain beneficiaries, at the least cost possible.


Doris Day’s husband died in his 60’s.  He had taken care of all the financial areas of their life.    After his death, Doris Day did not know what she had, or what she owed.  The net result was she ended up owing a fortune to the IRS, in income and estate taxes.

Business owners not only have needs as business owners, but also have needs as individuals. Consequently, it’s not only the business planning that needs attention, but also a coordination of their personal situation.     In many situations, the owner’s planning is more complex because of the business ownership.

Continue reading “The Small Issues Which Business Owners Need To Know About!”

The Complexities and Issues of Business

A chief concern for many business owners is how to arrange the orderly transfer of business to the next generation of family members or key employees. By far the biggest concern is how to keep the family business and the family. It is estimated that more than 70% of family-owned businesses do not survive the transition from the founder to the second-generation.

There are essentially three levels of the business succession plan.

Management; this is day-to-day management of the business which can be left to one person, one child or a group  of children. Also, this group might not be active in the business. This group could also include key employees rather than family members

Ownership; most owners would prefer to leave their businesses to the children that are active in the business. However, not all the children might be involved. Owners would still like to treat their children fairly, but not necessarily equally. Consequently, if the business interest is not left to a group of children, some other value would be left to the non-business children. A subset of this topic is whether the business owner will need a continued economic benefit from the business after the transfer. Also, will the business owner continue to control the business after the transfer is complete.

Transfer taxes; estate taxes can erode business value.   The question would be is there enough liquidity to take on the debt and keep the business going? This is truly a challenge to high-value business especially with a estate tax being a moving target as to the exemptions and percentage of taxations.

 Level I management

It might take many years for an owner to train the successor management team so that the business can run automatically. This allows the owner to walk away from the day by day operations. To do this the owner must give up control and tasks in which they ordinarily controlled. This is easier said than done. Whether the owner creates a management team with the next generation, or a key group of employees, the owner must learn to delegate important tasks.

Continue reading “The Complexities and Issues of Business”

Will You Go Broke Selling Your Business?

If I sell my business today, pay my taxes, brokers and professional advisors, and  “I then invest the remainder conservatively, will I still be able to enjoy my current lifestyle?” Most business owners have asked themselves this question. After building a successful business, they wonder if they will net enough cash from its sale to maintain their standard of living. Often, after calculating the potential returns of investing the sale proceeds, they realize they can make more money by holding onto the business and becoming “passive” owners.

Continue reading “Will You Go Broke Selling Your Business?”

Transferring A Business To Insiders

Selling your business is an important financial transaction that requires a well developed exit strategy. Many owners view their business as much more than an asset. They’ve poured their hearts and souls into it. Maintaining the established business culture motivates them to sell to insiders. In fact, 95% of all sale transactions involve insiders, who may include co-owners, family members, managers and key employees. The insider group that is buying the business is called a key employee group (KEG).

There are four ways to transfer a business to insiders: Continue reading “Transferring A Business To Insiders”

What If I Want to Recruit a Key Employee?

The objectives of recruiting a key executive from the marketplace are to make your business more profitable, to grow the company and / or to bring talent to your business that does not currently exist. You must design incentive plans that achieve those goals.

You will always be a slave to your business unless you have capable management in place to run the business when you are not there. If you someday hope to sell your business to an outside buyer, you will need to have solid managers in place to get serious consideration from an outside buyer. As is the case with most companies, the management team could someday become your buyers. If you want to transfer your business to your children, you will need key employees in place to assist them with the transition.

In order to attract the right person to your company, you must offer them an incentive plan that rewards them for efforts that increase the value / profitability of your business.

You should pay a key employee for projects that they initiate. This could be an additional six percent or more of their base pay. When this key employee has a positive effect on the rest of the management team, pay them a bonus based upon that influence. This could be 10 – 20 percent of their base.

When hiring for key management, we find that most compensation packages combine base and incentives. Determine the incentive on the company’s growth once that employee joins you. Decide how much you are willing to pay the right employee and then back into that figure.

Continue reading “What If I Want to Recruit a Key Employee?”