Exit Planning in Southwest Florida: Preparing for Life After a Business Sale
Selling or leaving a business can create a significant transition in an owner’s personal financial life. A business may represent a substantial portion of an owner’s wealth, making the timing and structure of an exit relevant to retirement income, investments, taxes, estate planning, and family finances.
Exit planning Southwest Florida business owners undertake can help connect the potential sale of a business with their broader personal financial plan.
Begin With Your Personal Financial Picture
Before considering how to sell a business, owners can review how the company fits into their overall financial position.
Questions may include:
How much income will be needed after leaving the business?
What personal assets are available outside the company?
How much liquidity may be needed?
When does the owner want to retire?
How might sale proceeds affect the investment portfolio?
Understanding these factors can provide a framework for evaluating potential exit scenarios.
Consider How Sale Proceeds May Be Used
A business sale can substantially change an owner’s financial position. After a transaction, the owner may need to decide how to manage cash, invest proceeds, fund retirement, or address other financial priorities.
Investment decisions can include considerations such as asset allocation, diversification, liquidity, and the timing of investing proceeds.
For example, Ballast Advisors includes portfolio management, investment management, asset allocation, and cash management within its small business planning services.
Review Tax Considerations Before the Transaction
Taxes can affect the amount and timing of proceeds from a business transaction.
The applicable tax treatment may depend on factors such as the business entity, transaction structure, cost basis, and whether the transaction involves business assets or ownership interests.
Business owners can coordinate with their financial advisor and qualified tax professional before a transaction is completed to evaluate potential tax considerations.
Ballast Advisors includes tax planning within its small business planning services and may coordinate with tax professionals when appropriate.
Connect the Exit With Retirement Planning
For many owners, leaving the business and retiring may happen at approximately the same time.
A retirement plan can consider potential sale proceeds alongside Social Security, retirement accounts, investment income, and other assets.
Healthcare expenses can also become an important consideration when evaluating future retirement cash flow. Medicare, insurance, long-term care, and other healthcare costs may need to be incorporated into the financial plan.
Review Estate and Family Considerations
A business sale can change the composition of family wealth.
Owners may need to review wills, trusts, beneficiary designations, charitable intentions, and other estate planning considerations after a significant change in assets.
An estate attorney can address the legal aspects of these decisions, while a financial advisor can coordinate related investment and financial planning considerations.
Think About Liquidity After the Exit
Leaving a business can mean losing a regular source of employment income. The owner may therefore need to consider how much cash should remain available after the transaction.
Liquidity can be relevant for living expenses, taxes, healthcare, major purchases, investment opportunities, and unexpected financial needs.
The appropriate amount depends on the owner’s circumstances, income sources, assets, and spending requirements.
Start Before the Sale Is Imminent
Exit planning can involve business valuation, transaction structure, taxes, investments, retirement, estate planning, and family considerations.
Beginning the process before a planned sale can provide more time to evaluate these areas and understand how different exit scenarios could affect personal finances.
Ballast Advisors is one example of a financial planning firm whose small business planning services include exit strategy, business succession planning, tax planning, retirement services, portfolio management, asset allocation, and cash management.
For Southwest Florida business owners, exit planning can connect the future sale or departure from a business with retirement and broader personal financial planning.
Frequently Asked Questions
1. What is exit planning for business owners?
Exit planning involves preparing for a future sale or departure from a business while considering personal finances, investments, taxes, retirement, estate planning, and family priorities.
2. When should a business owner begin exit planning?
There is no universal timeline. Starting before a planned transition can provide more time to evaluate the business, potential transaction structures, taxes, investments, retirement needs, and personal financial priorities.
3. How can a business sale affect retirement planning?
A business may represent a significant portion of an owner’s wealth. Sale proceeds can therefore affect retirement income, investment assets, liquidity, and the timing of retirement.
4. What tax considerations should owners review before selling?
Potential considerations can include capital gains, business entity structure, transaction structure, cost basis, and the treatment of business assets or ownership interests. A qualified tax professional can provide advice based on the specific transaction.
5. How can business sale proceeds fit into an investment portfolio?
Owners may consider cash reserves, asset allocation, diversification, liquidity, retirement income, and the timing of investing proceeds. The appropriate approach depends on the owner’s circumstances and objectives.
6. Does exit planning include estate planning?
It can. A business sale may significantly change family wealth and the assets included in an estate plan. Coordination with an estate attorney can address related legal considerations.
This material is for informational purposes only and does not constitute legal, tax, or investment advice. Please consult appropriate professionals before making decisions. Investing involves risks. Asset allocation and diversification may not protect against market risk, loss of principal, or volatility of returns.
IMPORTANT DISCLOSURES
The opinions expressed are those of Ballast Advisors, LLC as of the date of publication and are subject to change without notice. This material is for informational use only and should not be considered investment or financial advice. The material presented has been derived from sources considered to be reliable, but accuracy and completeness cannot be guaranteed.
Ballast Advisors, LLC is a registered investment advisor under the Investment Advisers Act of 1940, as amended. Registration does not imply a certain level of skill or training. More information about the firm, including its services, strategies, and fees can be found in our ADV Part 2 and/or Form CRS, both of which are available without charge upon request. BAL-25-64
