5 Questions to Ask Yourself About Your Family Business Exit Plan

If you're nearing retirement, you may have a very clear idea of what you hope to do next. Or maybe you have no idea at all, and never really considered what might come next. In either scenario, thoughtful exit planning is key to assessing your assumptions deciding on the best option for your company, and ensuring that years—or decades—of hard work do not go to waste. A business broker can help you choose the best option if M&A is on the table—and even if it’s not, they can educate you about the considerations you need to weigh before exiting your business. But before you make any decisions, ask yourself the following. If these queries turn up any uncertainties or mixed feelings, consider discussing those with a business broker who has significant experience in your niche. 

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Is there an heir apparent? 

Owners of family businesses often groom children or other relatives with the intention of one day handing over the reins. If there’s a clear heir apparent, you should be grooming them to take over the business. Too often, though, owners of family businesses are overly involved in the company, thereby denying the heir apparent the experience and knowledge they need to one day take the helm. 

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Do I have any unstated assumptions? 

Family businesses function a lot like families themselves: people fall into roles, often without any discussion of why. Do you have unstated assumptions about your business, like that your daughter will take the lead or that your son will eventually become interested? Consider what you’re assuming will happen in the future, then make those assumptions explicit. How realistic are they? And how might they impact the future of your company? 

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Do I know all of my options for retiring? 

Many family business owners think they have only two paths out: sell the business, or hand it over to an heir. The truth is there are many roads in between these two extremes. A business broker can help you fairly evaluate each of your options. 

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How much is my business worth? 

To you, your business is invaluable—the culmination of a lifetime’s worth of work. To a buyer, though, it’s property and an investment. How much is that worth? Your emotional attachment to the business doesn’t matter. What matters is how a buyer might perceive your company, and whether they feel confident that can generate additional value above and beyond what you’ve already done. You need a credible valuation from a knowledgeable broker to disabuse you of any emotional assumptions you might be making about the worth of your company. 

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How much money do I need to retire? 

Most owners have a number in mind, but that number is rarely rooted in specific, evidence-based projections about your future budget. Planning for the future of your business begins with planning for your own future. Work with a wealth advisor to arrive at a specific number, then be clear with your business broker about what that number is. 

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