News and Commentary

UPDATED It’s Never Too Early for Business Owners to Plan their Exits by Eric P. Zeitlin

One of the biggest challenges entrepreneurs must confront is how and when they will exit the businesses that they spent the majority of their lives building.  After all, business owners view their companies as extensions of their personal identities. They neither have the desire nor the time to think about what will happen if and when they will retire decades from now. Yet, advance planning is the only way that you, as an owner, can continue to grow your business today and control what happens to that company, your own families’ financial security and your legacy long after you are gone.

Developing a succession strategy can be a time-intensive and emotionally charged process. It involves many moving parts that require constant attention, nurturing and education over many years to achieve the intended results. Therefore, the sooner you begin planning, the better the odds of a positive outcome. In fact, having a succession plan in place early on will go a long way toward alleviating headaches and ensuring your business can survive and continue to provide financial support to family members and employees should anything unexpected happen to you, including disability and death.

Rather than thinking about a succession plan as a roadmap to a final destination, view it as an ongoing process of making decisions and putting into place the appropriate measures to ensure you minimize your exposure to financial and business risks. Essentially, the steps you take today will better prepare you and your business for a successful sale or transition of ownership in the future.

One of the first steps of crafting a succession plan is to understand how much the business is worth or how much it can be valued at in the future. Has the businesses and its assets been appraised by a professional? How much are similar businesses in similar industries and locations selling for currently? Are you meticulous in maintaining the business’s financial records? Are there issues that would raise concerns from a potential buyer?

Next, consideration should be given to what you ultimately want out of your succession plan. Do you want to keep the business in your family? Is there an obvious successor, whether it be a relative or employee, who is interested and able to lead the businesses through a rapidly changing competitive environment?  What sort of training would a successor need, and how would you measure his or her ability to take over? Do you want to sell the business and walk away or do you want to continue working in some capacity? How can you grow the business to maximize value? Will you continue to need the income from the businesses to fund your retirement years?

It is important to consider these questions and determine the answers under the guidance of financial and legal advisors, who can provide the professional counsel needed to ensure that your exit strategy considers and fits within your exiting estate plan. Not only will you want to maximize the value of the company, you should also consider terms of your exit and whether the value you receive is sufficient to meet your lifestyles needs and family objectives. Ultimately, you will want your business and your exit plan to be structured properly to preserve wealth and minimize tax liabilities. Moreover, your financial and legal counselors have a keen understanding of your unique needs and wishes and your family’s dynamics. They can also provide a unique perspective and help to mediate family discussions so that your succession plan is considered fair and meets the personal and financial needs of all your heirs.

Disagreements among surviving family members with different levels of involvement in a business are among the top reasons why many succession plans fail and those businesses do not survive past the second generation.

To help effectuate a smooth sale or transition of ownership either to a family member or an unrelated third party, several estate planning issues and strategies should be considered. For example, a buy-sell agreement that details the rights and responsibilities of all the business’s owners and lays out a plan for how they may sell their shares, to whom and at what price is a critical component of any succession plan. Consideration should be given to using life insurance policies, creating trusts and gifting shares of ownership interest directly to family members, keeping an eye on lifetime gift and estate tax exemption, capital gains as well as valuation discounts for transfers of non-controlling interests.

The more structure you can put around your succession plan, the easier the transition and the more likely you will be prepared to fund your post-business-ownership lifestyle. Engage professional counsel early on and focus more on the planning than the actual exit to improve your financial security and that of your family members for many generations to come.

About the Author: Eric P. Zeitlin is managing director of Provenance Wealth Advisors, an Independent Registered Investment Advisor affiliated with Berkowitz Pollack Brant Advisors + CPAs, and a registered representative with Raymond James Financial Services. For more information, call (954) 712-8888 or email

Provenance Wealth Advisors, 515 E. Las Olas Blvd., Ft. Lauderdale, FL 33301 (954) 712-8888.

Eric P. Zeitlin is a registered representative of and offers securities through Raymond James Financial Services, Inc., Member FINRA/SIPC.

Raymond James is not affiliated with and does not endorse the opinions or services of Berkowitz Pollack Brant Advisors + CPAs. PWA is not a registered broker/dealer and is independent of Raymond James Financial Services. Investment Advisory Services offered through Raymond James Financial Services Advisors, Inc., and Provenance Wealth Advisors.

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