I have been skydiving twice. Both times in Lompoc, CA. The Pacific Ocean spread out to the west, and a valley floor of colorful flowers below. I jumped out of an airplane at 18,000 feet and it was exhilarating. I loved it. Tom Petty’s Free Falling was the background music on the video DVD I ordered for $30. It was awesome.

For those that enjoy thrills, skydiving is a must. For those seeking to sell their business and retire, I do not recommend the skydiving method of retirement. What do I mean?

Well, when I jumped out of the airplane I yelled, “Geronimo!!” It seemed appropriate. For business owners ready to sell their business without doing any Exit Planning, its the same thing as skydiving. By listing your business with the intent to retire, but with no planning on the front end, you are yelling, ‘Geronimo!!’ as you jump out of the airplane.

The main difference is I had a parachute. You will not. Consider the chart below: 

A staggering 90% of business owners have no formal retirement planning prior to listing their business. This is even more staggering when one considers that retirement is the number one reason by a long shot for selling - across the value spectrum. Over a survey of 296 closed transactions ranging from <$500k to $50mm, retirement was the number one reason for selling regardless of the deal size. Anywhere from 39% to 68% of sellers list Retirement as why they want to sell. Yet, despite the ever growing numbers of retirees, business owners across the board favor the Geronimo method of exit planning and neglect preparing for this momentous, life changing event. 

The primary risk with the Geronimo method is the value of the business is not enough to meet the seller’s needs to complete their retirement package. On average, 70% - 90% of a small business owner’s net worth is tied up with the business. It is an integral part of the overall retirement package. The seller must get a certain amount for the sale of the business, or, the seller is unable to retire thus unwilling to sell. 

As a business owner meeting with your team of professionals to plan will ensure you not only secure your financial future, but maximize the value of your business. I tell owners to go visit with a broker 2-3 years out from selling. A good firm will form a relationship with you knowing you could be a potential future client. 

A great firm will give you tips on how to increase the value of your business in the next 2-3 years to get what you need. The firm that goes the extra step on the front end, is the firm you would be wise to hire when the time is right to sell the business. Also, plan with your financial advisor. Know where you are now, and what you need to retire. Have a road map on how you plan to achieve those goals. Your financial advisor is the expert in that category.

Preparing on the front end by have a strategic exit plan will protect your financial legacy. You will secure your financial future, maximize your business’ value, and be able to skydive into retirement with a parachute. 

Otherwise, you are just screaming “Geronimo!”. Good luck.

Shep Campbell

C: (870) 450-3734

Merger & Acquisition Specialists