Unless you’re the owner of a multi-billion- or trillion-dollar corporation, your business is likely subject to the whims of a changing marketplace. External changes in the market can sometimes force you to deal with problems you never imagined.
Though these changes may be unexpected and frustrating, there is a method that can help you roll with the punches more smoothly: planning.
Let’s look at three big ways that planning for a successful future as you approach your eventual business exit can help you make internal adjustments to external changes.
1. Building a business that doesn’t need you
A common hurdle that business owners struggle to overcome is making themselves unimportant to the business.
A business that relies on its owner for success may fail without the owner at the helm. Some of the most common external forces that make it impossible for a business owner to continue running their business are things that you may be able to handle if you have a plan.
If you die or become incapacitated unexpectedly?
- Proper planning could include business continuity instructions to help your business continue even though you can’t run it, which may help your family achieve long-term goals despite your absence.
- Life or disability insurance may help your family bridge their income gap in the immediate aftermath.
- A next-level management team may be able to allow the business to thrive, protecting employees and other people who rely on your business against your unexpected absence.
Unexpected regulatory pressure?
- Your advisor team and next-level managers may be able to find new, previously unconsidered strategies to help you navigate those regulatory changes.
No longer interested in owning a business?
- Strong planning may be able to help you make your exit in ways that support your financial security and other goals before you burn out entirely.
It may seem counterintuitive at first, but building your business to thrive without you at the helm is one of the most powerful ways to take internal control over external events that may have negative impacts on your business.
2. Keeping things running
It’s one thing to create plans that make you unimportant to your business; it’s another when someone other than you has to enact them.
Business continuity instructions could help you establish processes that allow the business to continue functioning—and ideally, thriving—if something makes it impossible for you to run your business.
No one ever wants to think that something bad will happen to prevent them from doing the things they love. But when it comes to business owners, the thing they love—running the business—may affect many more people.
For example, if you were to die suddenly, business continuity instructions could give your family, your advisors, and your business a path toward fulfilling as many of your established goals as possible. These instructions may outline who is now in charge of the business, what your family could do to stay financially solvent, and what steps your advisors should take to implement your planning.
Or consider a less morbid example. Say that you were tapped to serve in an important government post that required you to leave your business. In a case like this, business continuity instructions can help your company operate while you leave to fulfill your duty. Planning may also be able to help navigate transitions if you were ever to come back to the business at a later date.
3. Insulating yourself against risks
A strong plan for a successful future could position you to mitigate risks that appear in the marketplace. These risks could take the form of new tax laws that affect your bottom line, new technologies with unintended consequences, or a good old-fashioned downturn in the economy.
Consider two examples that are relevant as of this writing: the Tax Cuts and Jobs Act, and the emergence of generative AI.
The Tax Cuts and Jobs Act is currently scheduled to sunset at the end of 2025. While the current administration intends to extend it, determining what an extension might look like is difficult. This could have a big impact on your business and personal finances.
Working with experts such as financial advisors and tax professionals could help you carve out a plan to address either an extension or a sunset of this tax cut.
Similarly, it seems like every business is attempting to integrate generative AI into their products. However, the waters are murky in terms of how generative AI interacts with copyright law, providing accurate information, and privacy—all of which may be important to your business. While generative AI has been a hot topic for quite some time, the boundaries of what it can and cannot do, along with the consequences of misuse, are beginning to appear.
Working with experts in information technology, copyright law, and privacy laws may help you avoid some of the biggest risks that this new technology creates, while taking advantage of any positive benefits.
Conclusion
In short, you don’t have to know it all. In fact, trying to know it all could be to your detriment. Working with experts can help you create plans that are coherent and strategic in pursuit of your overall goals, which helps you stay nimble in a constantly changing market.
We strive to help business owners identify and prioritize their objectives with respect to their businesses, their employees, and their families. If you have questions on this topic, we can help with more information or a referral to another experienced professional.
As Your Family CFO, we are financial advisors for life’s big decisions. No matter what stage you’re at on your wealth journey, we go to great lengths to build a better, closer relationship with you. That means that you can expect exceptional personal attention, access to in-house expertise and a proven track record of real-world solutions. The depth and breadth of our service is what separates us from our competition. With more than 100 years of industry experience, our team is strategically designed to be multigenerational because our client relationships are multigenerational. We proudly work with clients at every stage of the financial life cycle, whether you are building a career or planning for the distribution of your wealth. Our practice is organized around our clients and their legacy – not an individual advisor – so that our continuity of service to you and your family is sustainable long into the future.
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The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need.
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Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.
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