Alert Calls for Motivated Entrepreneurs from a Business Expert

In a recent report by the Exit Planning Institute, the 2023 National State of Owner Readiness revealed critical areas where business owners tend to be unprepared. One of the key findings was that only 42% of owners have a formal, written transition plan for their company, leaving a significant number without a clear succession strategy.

This lack of planning can have far-reaching consequences, including the potential for a nasty tax bill, difficulties in preserving business and personal assets, and challenges in supporting succession plans. To address these issues, tools such as insurance, buy-sell agreements, and emergency funds can be utilised.

However, the statistics do not have to spell doom for business. Instead, they serve as a motivator to start planning. For instance, only 30% of business owners have a written estate plan, a crucial document that can help protect business and family legacy from unforeseen events.

Another area of concern is the financial preparedness of business owners. About 42% lack a written personal financial plan, and many do not have one prepared by a professional financial adviser. To secure a financially stable future, it's essential to develop a plan that supports long-term independence and lifestyle goals.

A comprehensive, personalized plan, involving a CERTIFIED FINANCIAL PLANNER® (CFP®) with Certified Exit Planning Advisor (CEPA®) credentials, can ensure that the financial future aligns with the business exit strategy. The CEPA certification, awarded by the Exit Planning Institute, is recognized as the most widely endorsed and accepted exit planning credential in the marketplace.

Beginning the planning process involves a business valuation and a personal financial audit, followed by the development of an exit strategy with a CEPA-certified adviser. Regularly reviewing plans to keep them relevant and ensuring they are clearly communicated is also crucial.

It's also important to consider the potential "wealth gap" that arises when 70% of business owners rely on income from their business to support their chosen lifestyle. To mitigate this risk, focusing on diversifying income streams and continuing to build business value is advisable.

Moreover, without a formal exit plan, a smooth and successful transition may face significant challenges. Statistics show that about 50% of business exits are involuntary, often due to one or more of the "5 D's": death, disability, divorce, distress, or disagreement with business partners.

Lastly, it's essential to remember that without a proper estate plan, business and personal assets are at risk. Only 24% of owners have a current will, a basic yet crucial component of any estate plan.

In conclusion, estate and exit planning are vital for business owners who wish to secure their financial future and ensure a smooth transition for their businesses. Starting the planning process early, with the help of a qualified and certified adviser, can make all the difference.