When you started your business, you had one singular goal: to be successful. Fast forward into the future and success presents business owners with a myriad of choices. Among them is the decision on whether to sell one’s business. If this is where you are headed, there are several important concepts to consider so that you can ensure a successful transition into a new phase of life, or breathe easier if your goal is to start a new business. We reached out to Ledyard National Bank to get some answers to the most pressing questions governing this arena.

Our panel:

Michael Hakoun, Certified Exit Planning Advisor, Executive Vice President & Managing Director, Ledyard National Bank

Susan M. Renaud, CPA, CFP®, Certified Exit Planning Advisor and Senior Financial Advisor, Ledyard National Bank

Fred Wainwright, Certified Exit Planning Advisor and Senior Vice President & Senior Investment Strategist, Ledyard National Bank

Susan M. Renaud

Q: Do you know what your business is worth? What value do you need from the sale of your business to achieve your goals?

A: It’s important to know what you plan to do next to determine how selling your business will help you meet those goals. Your financial advisor can help you define your “wealth gap,” or the difference between the net worth you need and the net worth you have, not including your business. Will selling the business give you enough?

Evaluating the “profit gap” and “value gap,” which compare your company’s performance to the best-in-class for your industry and size, will identify ways to increase value. Understanding these three gaps will help you maximize the actual value of your business and what you could or should do to improve that value and shrink the wealth gap, getting you closer to achieving your goals.

Fred Wainwright

Q: Do you know the four “intangible capitals” that make up a significant portion of the value of your business?

A: Human Capital: Your business is nothing without your team members. Are your key employees thriving, or does the whole business revolve around you? Surround yourself with incredible talent that can carry the business forward with the new owners.

Social Capital: This is your culture. It combines the values that drive decisionmaking for your employees and the perceptions of your brand by customers as well as the community. A buyer will pay more for a cohesive culture and a strong brand.

Customer Capital: Does your business rely on only a few customers? A more diversified customer base will drive a higher valuation.

Structural Capital: Do you have the systems, processes and documented procedures that ensure effective operations? All of this makes for a smoother transition for a new owner.

Michael Hakoun

Q: Many business owners regret selling their business a year later. Will you be one of them?

A: Peter Christman, co-founder of the Exit Planning Institute, describes the exit planning process as a three-legged stool. Each leg needs attention for a successful transition.

Life Plan: You probably know individuals who sold their business and now feel lost — their identity was in their business. Taking time to plan for your next act is essential. Knowing what will bring you and your family joy, impact and satisfaction deserves your attention sooner than later.

Personal Financial Plan: How will you support the lifestyle you want in your next act? Your financial advisor can help you run scenarios based on your prioritized goals and potential net proceeds from the sale of your business.

Business Value: Research shows that over 80 percent of owners’ net worth is in their business. Studying and modeling best-in-class businesses in your industry can help you maximize your valuation.

Finally, up to half of business owners experience one of the five “Ds” that force an exit (death, disability, distress, divorce or disagreement). Are you prepared for these contingencies? It is important to have a plan that will de-risk the impact of these potential events. Your financial advisor can help you assess what you have in place and what you need.

Looking forward, there will be a time where you will not own your business. It makes sense to start planning for that now. Exit planning is good business strategy that is integrated with your personal and financial goals. It’s important to have a team of experts working with you to review where you are and design a plan that meets your needs. Contact us to discuss how we can help you with this process.

To learn more about this process, please contact John O’Dowd at john.odowd@ledyardbank.com