New York Estate Planning & Elder Law Blog
The stock market over the last ten years has increased the valuation of many retirement accounts. Consequently, many people interested in estate planning are focused less on internal growth necessary for succession planning than at other times.
Inflation is much like gravity. Both rise and fall. With inflation occurring at substantial levels during the war in Ukraine, people interested in making the most of their estate plans should recognize that their plans ultimately might require a proactive effort. This article reviews some important details that you should consider when creating a strong succession plan.
Focus on Your Goal
When you give yourself adequate time to obtain your goals, you have the freedom of thinking about the bigger picture. Early on is a good time to determine what you believe is the most successful outcome for your goals. Some key issues to address include:
- Whether you have a specific financial value in mind for the business
- Whether you prefer to have an outright sale of the business or utilize a successor
- Whether any of your children are interested in continuing the business
- Whether you want to immediately quit the business or slowly transition away
You should try to obtain as specific as possible a mental image of what you would like the next phase of your life to look like. Many business owners focus on daily operations and fail to consider the long-term. The better that you can think in the long term, often the more easily you can transition into life past your business.
Obtain a Valuation of Your Business
Deciding on your starting point is just as valuable as the ending. A baseline can help decide on the distance that our business must travel for your goals to materialize. Additionally, you are establishing a road map to make sure that you obtain your destination. Business owners often unfortunately discover that this gap is bigger than they anticipate. Obtaining a valuation of your business currently is the best way to know exactly where you are situated and where you can reasonably proceed.
Implement a Contingency Plan
The best way to obtain an ideal outcome by passing on a business is to reduce the risk that an unanticipated event could end up ruining your plans. One study by the Exit Planning Institute revealed that 64% of people who own businesses believe that there will not be any emotional impact from selling their business. In reality, 75% of business owners experience remorse in the year after selling their business. These business owners might end up thinking their business’s value was greater than the price for which the business was sold. A small number of study participants report taking the time to plan what lies past selling a business. For other people, anxiety connected with a perceived loss of identity might be made worse due to family dynamics. Other times, health issues can arise which can complicate emotions about the sale of a business.