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Want the best vacation of a lifetime?

June 25, 2019

By Martha Sullivan, CPA, CVA/ABV, CM&AA, CEPA
Partner, Succession Planning Practice Leader

Martha leads HK’s succession and exit planning services division and is a regular contributor to Wisconsin’s InBusiness digital magazine.

So where should we go this year? The Rockies? Yellowstone? Out east? What should we do? Should we go hiking? What if we learn how to sail a big boat and go down the coast? Or, what if we visit all of the major league ballparks?

It’s true. Planning your summer vacation can be fun — a lot of fun. The options are endless and you can tailor the trip to do those things that you enjoy doing. You get to spend time with people you want to be with (unless, of course, you’re the mortified teenager in the back of the minivan.) It’s an exciting project because you get to:

  • Decide who you want to come along with you;
  • Figure out what would be fun to do;
  • Check out places you’ve never considered going to before;
  • Compare the options, what they cost, and what you can afford;
  • Decide how to make the most of the dollars you have to spend;
  • Talk with others about the options and the fun things to do; and
  • Go on vacation!

Sometimes the anticipation of the trip is just as fun as the trip itself. I remember planning a surprise trip to Hawaii for my husband and myself. After over 25 years of marriage, it would be the first time we had escaped kid-free in decades. I had a blast researching where to go, how much it would cost, and so on. I ended up having to share the surprise sooner than I had intended, which actually turned out OK. Then we could both feel the excitement building and talk about how we wanted to share our precious time together. The journey was wonderful!

As it turns out, I am not alone in my willingness to put in the time to plan a kick-tail vacation. According to the Exit Planning Institute, people spend more time planning their summer vacation than they spend planning what I call their “Big Vacation” — the exit from their business.

In The $10 Trillion Opportunity, Richard Jackim notes that only about 28 percent of business owners have done any exit planning whatsoever. Further, over 75 percent of sellers express dissatisfaction after the sale, stating that the process and/or the deal did not meet their personal or financial objectives. Failure to invest in the development of a well-defined exit plan costs the owner plenty, including:

  • Leaving money on the table due to not optimizing the business value or sale process;
  • Unnecessarily sharing too much with Uncle Sam;
  • Loss of control of your exit — when, to whom, etc.; and
  • Failing to realize your goals.

There are many reasons for avoiding planning for the “Big Vacation” according to Jackim, such as

  • Time is already tight;
  • Not knowing where to start;
  • Not knowing who to turn to for help;
  • Reluctance to talk about such personal matters;
  • The process seems overwhelming and complex;
  • Fear of loss of the business, their identity, and their work relationships; and
  • No idea what they will do after.

As the baby boomers have moved into retirement, they’re redefining what retirement is. It’s no longer sitting on the couch, watching soaps, and eating bon-bons. This generation of retirees is more active and intends to stay that way. Whether getting a part-time job or doing volunteer work, we want to stay busy and engaged. Another key factor contributing to satisfaction in retirement is how well they are financially prepared for it. Proper exit planning includes these crucial considerations.

Exit planning process contains many moving parts and pieces. Let’s summarize it in seven steps:

  1. Assemble your team — Exit planning, done well, should be a collaborative effort between your accountant, attorney, wealth manager, and banker. Bring them all together to ask them to help you in this journey. Find the one advisor who you feel can be your quarterback carrying the play onto the field and coordinating the team’s efforts.
  2. Understand your personal goals and objectives — This step may be the hardest because this is where your start planning the vacation. The sheet of paper is blank. What is it you want to do? What do your relationships look like and how will you take care of them? What legacy do you want to leave? When might you want to exit? What is Plan B if something unexpected comes along?
  3. Map out your personal financial goals — During this step, you reacquaint yourself with your current financial state relative to your lifestyle. Once that is understood, consider how that fits in with your personal goals and objectives. In essence, do you have the resources to fund the big vacation?
  4. Assess the value of your largest asset, the enterprise value of the business — There are a number of approaches that may be taken to assess the strength of your business and what levers can be pulled to drive value, from strategic planning to an operational review to a formal business valuation. Your team can help you tailor the best approach that fits your business.
  5. Gap Analysis — Armed with information regarding your financial picture, including what your business may be worth, the team can help you assess what, if any, gap exists between what your resources will support and the goals and plans you have for life after the business and/or retirement.
  6. Opportunities and options — There are three basic exit options: sell, transition to the next generation or management, or simply close and liquidate. All should be seriously evaluated. The options available to any one business owner can fall along many different points on that continuum. The efforts of Steps Two through Five create the framework to align your goals and objectives with your resources, and identify which options fit your situation.
  7. Exit Plan development and execution — There may be only one or may be multiple options that fit your situation. In this step, it is up to you — with the help of your team — to decide which option(s) you want to pursue and then set out the specific tasks that need to be performed to execute that plan. Depending on the state of the business, it may include taking actions to enhance the value drivers. It may include specific estate and estate tax-planning initiatives. Your plan may include diving into learning new hobbies or pursuing other interests so there a social network you to transition into when the time comes.

Taking these steps may lead you to some interesting and important conversations with your spouse/significant other, family members, and other shareholders/stakeholders. Chances are if it’s on your mind, it’s on theirs, too. The conversations may not always be easy; in fact, if they are easy, they’re likely not going deep enough. However, they open up opportunities for understanding what is important to you, to them, and what the future may hold as you head toward the next adventure in your life.

Next time you think about need to plan your next getaway, commit instead to planning your Big Vacation. It’s bound to be an adventure!

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