Legacy Planning in Your Exit
Business owners work hard to build their business into a successful enterprise. They’ve created a strong culture, built a reputation in the community, and provided jobs for many people.
But, what happens when it’s time to exit the business? How can you properly plan with your clients to ensure that their legacy will continue, and that their non-financial goals will be met?
When it comes to building a legacy after retirement, Avoiding Exit Planning Mistakes early on in the Exit Process can save your client both time and money.
How your client defines their legacy is a major aspect of planning a business exit. Beyond creating financial goals and establishing financial security, it involves identifying non-financial goals for the business, such as preserving company culture or maintaining a positive reputation in the community. Join us as we dive into a few quick tips for defining non-financial goals in your client’s legacy plan.
Defining A Legacy:
Identify the company culture: What are the values that have made your client’s company successful? What makes their workplace unique? By identifying the company culture, you can ensure that it is preserved after they exit out of the business.
Consider community involvement: Has your client been involved in their local community? Do they support local causes or charities? By including community involvement in your client’s legacy plan, you can assist in ensuring that the business continues to be a pillar in the community.
When thinking about ways to make a lasting mark post-exit, consider donating a portion of the business’s profits to a local charity or creating a scholarship fund for local students. Planning efforts such as these will ensure that the business will be remembered for years to come.
Additionally, your client can ensure that their business’s resources are being used to benefit others by dedicating a portion of their profit to causes that are important to the company and its employees. By taking the time to consider the community’s needs, you can ensure that your client’s legacy is a lasting one.
Think about employees: Employees are a crucial part of any business’s success. Consider their needs and concerns when defining your client’s non-financial goals. This could include providing them with job security or ensuring that their benefits are not impacted by the business exit.
Depending on the emphasis you believe that your employees have on the continued legacy of the business, your chosen exit path might inherently put your legacy in the hands of your employees (or children). For example, owners who opt for an Employee Stock Ownership Plan (ESOP) or an insider transfer to a key employee have likely made that choice in part due to the implications that path can have on one’s legacy.
Set clear expectations: Make sure that all non-financial goals are clearly defined and communicated to all parties involved in the business exit. This will help ensure that the business owner’s legacy is preserved and that non-financial goals are met. This includes setting expectations with the owner’s family and communicating the goals and how they may impact how they believe this transition will occur. With enough time and proper planning, an owner can meet their non-financial objectives while also meeting the financial goals to provide for their family post-exit. Making any assumptions about how the family feels about this plan and the family legacy the owner is leaving can derail the process, so it’s best to make those intentions known early on.
It is important as the Exit Planning Advisor to be upfront with your business owning client early on in planning meetings and conversations. Complete communication is imperative to form and shape the Exit Plan effectively.
Leaving a Legacy Post-Exit
In addition to defining non-financial goals, it’s important to consider how your client’s legacy will be passed on. This could include passing their business down to a family member or selling it to a new owner who shares the same values and vision for the business. Check out this article from Forbes to see first hand how important planning a legacy can be for future generations.
Legacy planning is not just about financial planning. It’s about defining non-financial goals and ensuring that your client’s legacy continues after they retire and exit their business. By identifying and contributing to company culture, community involvement, and employee needs, your client can work with you to create a plan that will help leave a lasting legacy and establish the owner as a pillar in the community for years to come.
It’s also important to consider how your client’s legacy will be maintained after they leave. This could involve a succession plan that outlines how the business will be managed in the future. It could also include a plan for ensuring that key employees remain with the company after the owner departs.
The Bottom Line
By doing your part to help build a lasting legacy, you have the opportunity to be a part of something that will benefit not only your client’s business, but the community around it. From setting up a trust or endowment to providing financial assistance to future generations of their family and others, there is room to be creative in planning for this type of exit goal. As stated in the aforementioned Forbes article, “Don’t wait - life’s too short not to leave your legacy how you want to leave a legacy.”
Transform Your Practice
Exit Planning can transform an advisor’s core practice. Hear how Exit Planning changed Aaron Harrison’s practice for the better and what he thinks he’d miss out on if not for Exit Planning.