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Umpqua Bank Insights

September 11, 2020 | Wealth

Planning an exit that’s optimal for you

What to cultivate now to be ready for harvest season

When you’re a farmer, over years and generations, you come to know in your gut what your land needs to yield a full harvest. You scan the sky and heed the weather forecast. You walk the fields, crumbling the dirt between your fingers. And you plan. Harvests don’t just happen on their own. A farmer plans and does the work at hand now, for the harvest they want later.

For a farmer, the result of good planning—plus good weather and a little luck—is a harvest that is bountiful enough to sustain others. If you’re a business owner, the result of good planning is an exit that harvests your hard work into a liquidity event that can set you up for the future you imagined.

 

Sowing seeds today for a successful exit

I’ve noticed something about my business owner clients. They want their businesses to grow and thrive. They spend the majority of their time on that goal. And many owners have most of their assets tied up in the business. That means they don’t give the proper time and attention to planning for their successful exit, which is not the ideal.

That’s why one of the first questions I ask is, “What do you want your lifestyle to look like once you’ve transitioned your business?”

Owners who take time now to consider their priorities and the associated costs are able to plan more effectively for a smooth business transition and the lifestyle they want in retirement.

 

Turning your focus to the next season

Certain decisions you need to make will vary based on the size, stage and unique nature of your business. But several of the crucial components you’ll need to be ready to decide in this planning process include: 

  • A current valuation of your business
  • An estimate of your business’s future growth potential
  • An opportunity for a sale or merger
  • Business strategy and management talent assessments
 

Take the time to plan

How much time it takes to be fully prepared for an impending change depends on the type of transition at hand. Some companies say they spend 1.6 years, on average, getting ready for these types of events, compared to an average of 1.2 years for mergers or acquisitions. Some companies spend even longer preparing for an ownership change: about a quarter of firms say they start the process three to four years in advance of the sale date.[1]

 

Learn more

What are the critical questions you should be asking as you turn attention to planning for your exit strategy? Contact an Umpqua financial professional today to learn more about our approach.

Reach us at (833) 898-0973 or WealthManagement@UmpquaBank.com.

You can also read about exit strategy and transition planning and questions we recommend you ask yourself by downloading our Umpqua topic paper, “Pre-business transition planning: Sowing the seeds of your exit strategy.”

 
Download the paper
 

Sources

[1] National Center for Middle Market Research, Research Report: “Preparing for Major Business Transition,” January 9, 2020.

Todd Aquilina Todd Aquilina

Todd Aquilina

VP, Sr. Private Wealth Advisor