Discovering Purpose Beyond Business: Lessons from My Own Exit

As a business owner, your company is more than just a livelihood—it becomes an extension of your identity, a vessel for your dreams, and often the center of your world. For nearly two decades, Solly’s Bagelry was my life. Co-founding and growing it into a cherished Vancouver institution brought immeasurable pride and purpose. But when I exited the business, I faced a challenge I hadn’t fully anticipated: finding my footing in a world where I was no longer "Joe from Solly’s."

The transition was daunting. My business wasn’t just something I owned—it was part of who I was. When I left, I experienced what many former owners do: an overwhelming sense of loss. Suddenly, the purpose and identity that fueled my days were gone. Like 75% of former business owners, I felt regret and uncertainty within the first year of my exit. Despite my successful financial transaction, I was left with a void that took me years to fill.

It took me five long years to rebuild my sense of identity and rediscover a purpose that matched the passion I had for Solly’s. This journey led me to a profound realization: I wasn’t alone in this struggle. Many business owners, after years of dedicating their lives to their companies, find themselves unprepared for the emotional and existential shift that follows an exit.

This epiphany became my calling. I became a Certified Exit Planner, dedicating my career to helping business owners navigate the complexities of not just their business transitions, but the personal transitions that follow. My role is to ensure that owners don’t just survive their exit but thrive afterward, finding a renewed sense of purpose that propels them forward.

Today, I work with ENNIS Legacy Partners to offer a unique workshop series designed to help former business owners discover their ikigai—a Japanese concept meaning "reason for being." This program is a transformative journey, helping owners reconnect with what they love, what they’re good at, what the world needs, and what can bring them fulfillment and reward.

The workshop isn’t just about avoiding the pitfalls of regret and isolation—it’s about reigniting the fire in your belly, so you wake up every morning excited about what’s next. Whether it’s mentoring young entrepreneurs, pursuing a passion project, or creating a new legacy, the program helps business owners craft a future that inspires them.

My own experience has shown me that life after business can be just as meaningful as life during it—but only if you prepare for it. That preparation goes beyond financial planning; it’s about envisioning a life that aligns with your core values, passions, and aspirations.

If you’re contemplating an exit, I encourage you to start planning your next act now. Don’t wait until you’ve handed over the keys to think about what comes next. With the right guidance and a clear roadmap, you can turn what feels like an ending into an exciting new beginning.

Joseph (Joe) Markovitch is a Certified Exit Planner, Senior Business Advisor and former Owner of Solly’s Bagelry Ltd, a Vancouver institution. Joe helps owners worth $5 or more maximize their exit payout while reducing tax so they can have more time with family and live life on their terms. Let’s work together to ensure that your life after business is the chapter you’re most proud of. For more info: joe@joeco.ca or email@ennislp.com.

Challenges Faced in Moving from Founder Mode to Manager Mode

Transitioning from founder mode to manager mode presents several challenges for small business owners as they plan for their eventual exit. Different leadership styles and approaches will be required as the business grows and moves from the start-up phase to a more mature stage. Here are some key challenges associated with this transition:

1. Letting Go of Control

• Challenge: Founders are used to being involved in every aspect of the business, from strategy to daily operations. Letting go of control and delegating responsibilities can be difficult, as they may feel no one else understands the business as well as they do.

• Impact: The reluctance to delegate can lead to micromanagement, slowing decision-making and growth. It can also create bottlenecks, as the founder becomes overwhelmed with too many tasks.

2. Shifting from Visionary to Operational Focus

• Challenge: Founders typically excel in setting a vision, driving innovation, and taking risks. However, manager mode requires focusing more on operations, process optimization, and day-to-day execution, which may be less exciting for visionaries.

• Impact: Founders may struggle to pay attention to detail, follow structured processes, or deal with routine tasks, which are crucial to managing a growing company. This shift from creativity to structured management can be frustrating.

3. Building and Leading a Structured Team

• Challenge: In founder mode, the team is often small, agile, and close-knit. As the company grows, roles must be formalized, a leadership team must be built, and clear organizational structures must be implemented.

• Impact: Founders may find it challenging to hire the right people for specialized roles, trust them to lead, and give up the hands-on approach. Moving from managing a few people to leading a large team with hierarchies requires different communication and leadership skills.

4. Process and System Implementation

• Challenge: Startups often thrive on flexibility and improvisation, with founders and employees solving problems as they arise. Creating consistent processes, implementing systems, and formalizing workflows in manager mode are necessary for scalability.

• Impact: Founders may resist implementing formal processes, viewing them as bureaucracy or fearing they will stifle creativity and agility. However, the company can experience inefficiencies, errors, and miscommunication without systems.

5. Balancing Innovation with Efficiency

• Challenge: In the early stages, the focus is often on experimentation and rapid growth. However, as the business matures, the emphasis shifts to sustaining and improving existing operations, which can slow down innovation.

• Impact: Founders may feel restricted by the need for stability and consistency, leading to frustration or the fear that the company is losing its edge. They must learn how to innovate within a more structured environment and balance exploration with exploitation of existing resources.

6. Changing Decision-Making Approach

• Challenge: Founders are often comfortable making fast, instinct-driven decisions, especially in a startup’s early, chaotic phase. However, manager mode requires a more data-driven, systematic approach to decision-making, with input from multiple stakeholders.

• Impact: This change in pace can be frustrating, as it may feel slow or bureaucratic. Founders may also find adjusting to consensus-building and decision-making processes involving multiple teams or departments difficult.

7. Evolving Leadership Style

• Challenge: In the startup phase, founders often lead by example, working alongside their small team and wearing many hats. In manager mode, leadership requires more delegation, coaching, and empowering others to make decisions.

• Impact: Founders may struggle to evolve from a hands-on leader to a coach and mentor. Some may find it difficult to trust others to lead parts of the business they once controlled, or they may lack experience managing at scale.

8. Cultural Shifts

• Challenge: As a company grows, its culture evolves. A startup's casual, entrepreneurial culture may give way to a more formal environment with policies, procedures, and defined roles.

• Impact: Founders may struggle to preserve the original culture while adapting to the needs of a larger, more structured organization. If this transition is not managed carefully, it could alienate early employees or create cultural friction.

9. Increased Accountability and Reporting

• Challenge: As a business scales, there is a greater need for accountability, both internally (to employees and managers) and externally (to investors, customers, and regulators). Regular reporting, budgeting, and performance tracking become critical.

• Impact: Founders may find these new demands tedious or at odds with their entrepreneurial spirit. Learning to appreciate and manage financial statements, compliance, and performance metrics is essential but often feels like a departure from the freedom they once had.

10. Adapting to a Slower Growth Rate

• Challenge: Growth can be rapid and exhilarating in the startup phase. However, as the business matures, growth typically slows, and the focus shifts from rapid expansion to sustainable profitability and market share maintenance.

• Impact: Founders may struggle with the psychological shift from chasing hyper-growth to being content with incremental improvements. This can lead to dissatisfaction or impatience, as they may feel the business has plateaued.

11. Navigating Investor or Board Expectations

• Challenge: In manager mode, founders often have to deal with external stakeholders like investors or a board of directors who expect regular updates, transparency, and a focus on profitability and governance.

• Impact: Founders may feel constrained by these expectations and struggle with the shift from independent decision-making to being accountable to others. The pressure to meet financial targets and adhere to corporate governance can be overwhelming.

12. Emotional and Psychological Shift

• Challenge: Moving from founder mode to manager mode often requires founders to redefine their role within the company, which can lead to an identity crisis. They may feel like they are no longer driving the company’s direction or being pushed out of what they built.

• Impact: This emotional transition can result in burnout, loss of motivation, or frustration. It can also cause tension between the founder and other managers or team members, especially if the founder resists stepping back.

How to Overcome These Challenges:

• Hire Experienced Managers: Bringing in professional managers with expertise in operations, finance, and HR can help bridge the gap between founder and manager modes.

• Delegate and Trust: Learning to delegate and trust the team is essential. Founders should focus on empowering others to take ownership of critical areas.

• Focus on the Big Picture: As the company matures, founders should focus on long-term strategy for growth and exit, vision, and leadership while letting managers handle day-to-day operations.

• Develop a New Leadership Style: Founders must evolve from hands-on involvement to coaching, mentoring, and strategic guidance.

• Accept the Need for Structure: Embrace the importance of processes, systems, and data-driven decision-making to ensure long-term sustainability and growth.

This transition can be difficult, but successful navigation allows the founder to play a pivotal role in scaling the business while adapting to the new challenges and opportunities that come with a more mature company.

We can help you overcome these founder challenges, strengthen your management team, and train and equip your successor(s). Contact us today for an exploratory conversation at email@ennislp.com or 301-859-0860.

Transfer of Ownership to a Business-Active Child

All business owners will need to answer these three questions at some point:

1. What is my desired date of departure or exit?

2. How much $$$$ will I need for my goals and for life after the business?

3. To whom will I sell my business?

For many business owners, the preferred answer to the third question is a sale or transfer to my child, or children, that are active in the business. In such cases, the owner would have legacy or values-based goals that would be realized with a transfer of the business to their children. And, it’s not uncommon for these goals to be as important to the owner as their financial goals.

First steps in deciding if this is your best option for exit would include the following:

• Does my child want to be an owner? It can be surprising for an owner to discover that their business-active child has no desire to own “the family business”.

• Is my child capable or have the temperament for business ownership? Owning a business is quite different than having even a significant leadership role in the business. And, as parents, we can be very generous in the evaluation of our children so it is wise to obtain an expert assessment.

• Should my child pay for the business interest? Would I want them to pay for all or some of the business? Do I want them to experience the financial challenges that often occur in the early years of owning a business?

• Is minimizing the overall estate, gift, and income tax burden important to me?

• Am I concerned about the “fair distribution” of my entire estate to all my children including those not active in the business?

• How soon do I want to transfer meaningful ownership interest to my business-active child?

• Quantify available assets and resources to accomplish financial goals:

  • Estimate the value of the business.

  • Project future net cash flow of business available for planning.

  • Value and income from non-business assets.

  • Calculate any gap between the current value and what will be needed post-exit.

Following are the most common methods for transferring a business interest to a business-active child:

• Sale of stock

• Gift of stock

• Bonus of stock

Each of these methods has advantages and disadvantages, but a good place to start is having your Wealth and Tax Advisors conduct an analysis of the tax consequences of each scenario for your specific situation.

Please contact us if we can be of service to you in helping plan for a transfer of your business to your business-active child. Also, consider investing 15 minutes in our FREE exit readiness assessment.

A Succession Plan or an Exit Plan? Savvy Business Owners Need Both!

One of the questions we often hear from business owners is, “What is the difference between Succession Planning and Exit Planning?  Aren’t they the same thing?”  Surprisingly, they are not.  The next question usually is, “Which one do I need?” The answer is simple.  Whether the business is small or large, family-owned or not, astute business owners always need both.

Nearly $10 trillion dollars in business assets will be transferred globally in the next decade, according to Forbes Magazine.  Baby Boomers selling privately owned businesses or transferring them to family members will comprise much of that $10 trillion dollar transfer.  As the market becomes crowded with owners ready to sell, the advantage will go to those owners who have done their due diligence, considered all of their options, and planned for unexpected contingencies.

Succession Planning

Succession Planning focuses solely on transferring leadership inside the business from one generation to the next.  Succession plans identify key individuals within the organization who can be trained and mentored to someday take over as the existing business leaders exit.  Succession Planning is just one necessary aspect of a more comprehensive exit plan.

Exit Planning

Exit Planning incorporates succession planning with strategies for building transferrable value, reducing tax liability, preparing for unexpected contingencies, minimizing family stresses, and increasing the likelihood of a successful business transfer.  Exit plans also incorporate the personal and financial goals of the business owner, their spouse, and their family.  A prudent exit plan starts and ends with the long term business and personal objectives of the owner.

Plan Ahead for A Successful Exit

Succession plans and exit plans so share an important characteristic – neither should wait.  Business owners who eventually want to sell for top dollar with the least amount of trouble must start the planning process early enough to give it the thought and consideration it requires.   With the proper plans in place, you, the business owner, gains the ability to make critical long-term decisions that will significantly increase the likelihood of selling or transferring the business when you want, to whom you want, and for the price you want.

Take our FREE 15-Minute ExitMap® Assessment and find out how ready you are to exit successfully.

Get 15% off of our ExitReadiness® ACADEMY online exit roadmap course with videos and planning template using code BLOG10.

Adopt A Scientific Approach To Planning Your Business Exit

In his book, “Think Again, The Power of Knowing What You Don’t Know,” New York Times bestselling author Adam Grant makes a compelling case for “the critical art of rethinking: learning to question your opinions and open other people’s minds, which can position you for excellence at work and wisdom in life.”

In Part One: Individual Rethinking, Grant explains how we often assume the roles of Preacher, Prosecutor, or Politician rather than Scientist in a key decision-making process and how that is often detrimental. Grant describes the following cycles while recommending the RETHINKING CYCLE as a scientific approach:

THE OVERCONFIDENCE CYCLE: Pride > Conviction > Confirmation & Desirability Biases > Validation

THE RETHINKING CYCLE: Humility > Doubt > Curiosity > Discovery

We have found that owners planning for exit who adopt a scientific or “rethinking cycle” approach are much more likely to experience a successful transition out of their business. They indeed humbly realize and proclaim that “they don’t know what they don’t know” and engage help in discovering what they should do and how they should do it. They understand what’s at stake and have intentionally questioned or doubted their convictions and biases, and, with humility and curiosity, they seek knowledge and wisdom from others who can challenge their current thinking. As a result, the chances for a successful exit and the owner’s peace of mind are greatly increased. The opposite almost always proves true on some level for an owner who moves forward adopting “the overconfidence cycle”.

One of Grant’s recommended “Actions for Impact” is to “Build a challenge network, not just a support network.” For an owner planning their exit, this could include business owner peers who have already walked the exit walk, as well as an expert advisor team (those who know that the owner doesn’t) who could serve in challenging the owner’s assumptions, convictions, biases, while providing needed knowledge and insight.

In planning for the most significant event as a business owner, your inevitable exit from the business, you would be well-served in reading Mr. Grant’s book and adopting his proposed RETHINKING CYCLE. Please consider contacting us about playing a role on your “Challenge Network.”

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

Will You Be As Responsible Exiting Your Business As You Have Been Building It?

One of our clients had built a thriving service business over 20 plus years and was able to exit successfully a couple of years ago.  When we first met to discuss his desire to exit about 5 years ago, we discussed his time frame and financial needs, but also his outside interests such as his basketball outreach to a local underprivileged neighborhood.  Many years ago, very discreetly, he began renting a gym weekly for teenage and college-aged kids in a low-income neighborhood and faithfully ran it at his own expense for years.  He lived life "others-focused" in both his personal and business life and we find that to be true for most successful owners.

Like other successful business owners, our client worked hard for decades withstanding downturns in the economy and persevering through other tough times while managing to build a profitable business.  A business that many people had come to depend on including employees, customers, vendors, suppliers, his family, as well as charities he supported. He had been deeply committed to his responsibility as a business owner, and now realizing all that was at stake, he wanted to be as responsible in how he left the business as he had been in building the business. And, he understood that it would require time and planning if he were to experience the same level of success.

Will you be as responsible in planning your exit as you have been in building the business?  In our client’s case, the business has been sold to insiders and has realized continued prosperity serving all stakeholders, while our client is flourishing in his well-planned and meaningful “life after the business”.

Plan now so that you are as responsible and successful exiting your business as you've been in building it. You can get started today with our free exit assessment. We do not request any confidential information, it requires 15 minutes of your time, and you will receive a 12-page report scoring you in four key planning areas.

email@ennislp.com | 301-859-0860

Keep The End In Mind

Often business owners are exhorted to build their business with "the end", or their eventual exit in mind.  This can be a good idea in that it lends toward building your business to have "transferable value", or value that someone else will want to buy and own when you're ready to leave.  Value apart from you the owner.

It is also wise to build your exit plan with the end in mind.  The end being, not just your eventual exit from the business, but also your exit from this life.  In other words, creating your business exit plan with your "desired legacy" in mind.  Each of us leaves a legacy, but we don't all leave the legacy that we want to leave.  

We find that when thinking of legacy, business owners often focus on the transition of wealth.  And certainly, the effective distribution of wealth to future generations is a most important consideration.  At the same time, there are other significant and unique factors pertaining to the legacy of a business owner:

• Family peace and harmony

• Provision for family and others

• Sustaining the culture of the business

• Effective transfer of personal and business values to future generations

• Reputation and role of the business in the community | Family name in the community and marketplace

• Continued service to employees, customers, vendors, local economy

• Being prepared for the unexpected

• The way(s) in which the business owner wants to be remembered

This is a limited and representative list of issues and categories for reflection and planning pertaining to the legacy of a business owner.  You may have other priorities and desires.  The point is, in order to leave your desired legacy, it will take reflection, planning, and time to execute the plan.  Get started as soon as possible, as we don't know how long we have to create a plan for our desired legacy.

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

Build To Keep As An Exit Route

Helping business owners clarify and establish their post-exit bucket list, financial, values-based and legacy goals, and choosing an exit route that provides them with the greatest opportunity to realize their goals, is what we most enjoy about the work we do. 

Establishing clear goals is essential and foundational for a successful exit plan.  For example, if an owner's passions now fall mostly outside of the business, selling to a third-party or an ESOP might afford them the most time and money, sooner rather than later, to pursue those non-business related interests.  Or, perhaps a sale-to-insiders or children could make the most sense if an owner has strong desires to transfer the business to those who helped build it, or to keep the business in the family. 

But what about "keeping the business"?  Is keeping the business a legit exit strategy?  And, could keeping the business best help me realize all my goals and objectives? 

First, keeping the business is indeed an exit strategy in that you would simply own the business until it was transferred, or shut down, upon your exit at death.  Too often this an exit route by default, due to a lack of strategic planning, not resulting in the true desires of the business owner being fulfilled.  However, with the right planning, keeping the business and transferring it at death, may certainly be the strategy that will prove most impactful in goal attainment. 

We have found that an owner who builds their business to keep it with the flexibility to accomplish all of their non-business goals and objectives, can end up having the greatest number of options for their eventual exit.  Let me explain.  If an owner builds in a way that allows them to realize their goal of traveling the world most of the year, and the business continues to prosper and grow while they're away, they have built a business others will want to own.  This owner would have the ability to attract third-party buyers and possibly have them bid for their business in a controlled-auction (depending on the size of the business).  However, this same owner may have an exit goal of transfer to key employees who have been instrumental in its growth.  Because the key employees currently run the business and it's very profitable, the owner is able to seriously consider the sale-to-insiders option, or perhaps an ESOP.  Or...now that this owner much enjoys owning their business (that has been "built to keep") and all of their goals are best attained by keeping it, their exit strategy might become keeping the business and transferring it at death.  This owner has more options because they have built a business that others want to own, but that they don't have to sell in order to accomplish their personal and financial goals.  They built it so they could keep it (if desired) and still pursue all of their non-business goals and dreams.

If you "build to keep" in a way that affords you the time and money to accomplish your non-business goals and objectives, you can increase your options for a successful exit.

Contact us through ennislp.com if you need help in clarifying your goals and objectives or building to keep.

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

“Thanksgiving” and A Successful Exit

“I’m grateful that we’re finishing the year strong!”

“I’m thankful we’re going to make it through another year”

“I’m grateful for our team!”

One of the key reasons we enjoy working with business owners is that we generally find them to be charitable, others focused, and grateful.  Sure, like the rest of us, they certainly have their days of complaining about things like lack of sales or “people problems”, but overall, our experience has been a mindfulness of all they’ve been “blessed with” and can be grateful for.

We regularly hear expressions of gratitude for…

·      “Our customers”

·      “Our sales”

·      “We made it through the crisis!”

·      “Our employees – the people who have helped me build this business”

·      “We’ve seen tremendous growth!”

·      “Success beyond my expectations and what it means for my family”

·      “We are still in business after all these years!”

·      “For our reputation and role in the community”

 As Exit Planners, it’s important to listen to what Owners are thankful for, because at the same time we learn what they most value and care about.  Understanding an Owner’s “personal core values” is key to effective planning for their eventual (and inevitable) business exit.  For example, if care for employees and their future is a PRIMARY goal in an Owner’s exit, a sale to a third party may not be the best route for their exit.  The owner-based goals, values-based (what they are most grateful for and care about) and financial, should have impact on what exit route they choose.

You can make much progress in deciding how and when to exit when you gain clarity in what you most value.  And there is no better time than the week of “Thanksgiving” to consider what you are most grateful for pertaining to your business. 

A suggested exercise is to ask yourself (and your spouse if applicable) the following simple question during this week of thanksgiving: “As a business owner, who, and what, am I most grateful for?”  And record your thoughts and responses. Then when your Exit Planner presents questions pertaining to your core values and values-based goals, with a goal of helping you decide on the best exit route to accomplish your goals, you will have clear answers with conviction.

 Happy Thanksgiving!

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

Adopt A Scientific Approach To Planning Your Business Exit

In his book, “Think Again, The Power of Knowing What You Don’t Know,” New York Times bestselling author Adam Grant makes a compelling case for “the critical art of rethinking: learning to question your opinions and open other people’s minds, which can position you for excellence at work and wisdom in life.”

In Part One: Individual Rethinking, Grant explains how we often assume the roles of Preacher, Prosecutor, or Politician rather than Scientist in a key decision-making process and how that is often detrimental. Grant describes the following cycles while recommending the RETHINKING CYCLE as a scientific approach:

THE OVERCONFIDENCE CYCLE: Pride > Conviction > Confirmation & Desirability Biases > Validation

THE RETHINKING CYCLE: Humility > Doubt > Curiosity > Discovery

We have found that owners planning for exit who adopt a scientific or “rethinking cycle” approach are much more likely to experience a successful transition out of their business. They indeed humbly realize and proclaim that “they don’t know what they don’t know” and engage help in discovering what they should do and how they should do it. They understand what’s at stake and have intentionally questioned or doubted their convictions and biases, and, with humility and curiosity, they seek knowledge and wisdom from others who can challenge their current thinking. As a result, the chances for a successful exit and the owner’s peace of mind are greatly increased. The opposite almost always proves true on some level for an owner who moves forward adopting “the overconfidence cycle”.

One of Grant’s recommended “Actions for Impact” is to “Build a challenge network, not just a support network.” For an owner planning their exit, this could include business owner peers who have already walked the exit walk, as well as an expert advisor team (those who know that the owner doesn’t) who could serve in challenging the owner’s assumptions, convictions, biases, while providing needed knowledge and insight.

In planning for the most significant event as a business owner, your inevitable exit from the business, you would be well-served in reading Mr. Grant’s book and adopting his proposed RETHINKING CYCLE. Please consider contacting us about playing a role on your “Challenge Network.”

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

Thoughts About Family Business Transfers

You might think that a transfer of your business to a child or family member would be the easiest exit route to facilitate. Whereas statistics reveal that only one-third of all family businesses pass successfully to the next generation, and only 10% to the third generation.

Owners considering a transfer to children often run into these obstacles, among others:

• The children not getting along with one another

• The children not interested in the business and with different career goals

• The children don’t have the same skill, ability, or temperament to be a business owner as the parents do

• Fairness in transferring wealth to both children active in the business and non-active

• The children want ownership and control of the business before their parents have achieved their financial goals

• The business is strong and large enough to support a transfer while also providing for the financial goals of the parents

All business transfers are challenging, but family businesses face especially significant challenges. However, with the right pre-planning, the obstacles can often be overcome and a successful transfer can be realized.

Following is a basic set of questions for evaluating whether or not a family business transfer is the best exit route for you and your family:

• How much wealth do want to keep? How much cash will you need post-transfer of the business?

• Do you children desire to be owners? How capable and prepared are your children for ownership?

• Is your business prepared for a successful transfer? Are growth and cash flow steady and increasing? Is the business large enough to support all children (if applicable) financially while providing each with areas of responsibility?

• Are you ready? Financially? Most business owners are unhappy within two years of leaving their business — do you have a plan for life after the business? Do you have a plan to minimize taxes in transferring the business? Do you have a plan to treat all children (business active and non-active) equitably?

• If applicable, can your children share ownership? Do you have any concerns pertaining to their relational harmony?

• What contribution do you want your business active child or children to make? Pay for all or part of the business? “Sweat equity”? Is their future ownership actually contributing to your retirement plan?

• Define fairness: What does “fair” mean to you and your spouse? To your business active child? To your non-business-active child? Do you need help with defining fairness?

• What is your contingency plan if transfer to family doesn’t work out? Sale to other insiders or ESOP? Sale to third-party?.

There is much at stake when and how you leave your business, and never is that more true than when transferring your business to children or family. You would be wise to be as thorough and detailed in your planning as needed well in advance of your eventual transition. For every question listed above, there can be ten or more “drill-down” questions. As always, please let us know if we can be of assistance.

email@ennislp.com | 301-859-0860

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

Sole Ownership and Planning for The Unexpected

A sole owner of a business who has a spouse and/or family has not a few key planning issues that need to be addressed before it’s too late.  “Too late” being the unexpected events of death or permanent incapacity or disability.  To illustrate, let’s use the following story that is based on real life events…

John Doe owned a very successful commercial real estate development firm.  He regularly met with his Business Advisor and they “game planned” aggressive growth strategies that were proving to be successful in building the value of the business.  To the point where John was seriously considering expansion into other geographic areas.  Life was good and the business was growing rapidly!

One evening after meeting with his advisor, John experienced a sudden heart attack and died later in the hospital.  At age 55 he still had family financial responsibilities, yet he had not been as thorough in his personal and family financial planning as he had been in planning to build the business.  It was time of extreme grief and mourning as well as uncertainty for Jane…

• She didn’t know what to do next.

• She didn’t know if John’s salary would, or could, continue.

• Employees and customers started to leave as there was not a plan, and so the business became less valuable and sellable.  This was problematic as Jane was dependent on the sale value of the business as John had limited life insurance and investable assets.

• Due to the high level of uncertainty, there was a lack of peace and stability for Jane and for everyone who was at all dependent on the business.

There were too many things that John didn’t do, and should have been done, to mention in a short blog post. So, highlighted here are just a few (not an exhaustive list) of the key planning solutions that, if John had put in place, would have helped in minimizing the agony that Jane and the family experienced…

• Clear written instructions that were aligned with updated and adequate estate planning documents as to how to continue the business.

• A personal financial plan that included a cash flow analysis of how much money Jane would need both short-term and long-term in the event of John’s early death. 

• A written resolution for Jane to continue to receive John’s salary until insurance proceeds were received.

• Plans for the business bank line of credit to continue uninterrupted.

• A current and adequate personal life insurance program.

• Key person life insurance on John that would have provided needed liquidity for the business to provide key employee stay bonuses, etc.

Subscribe to our podcast (scroll to end of homepage) and get a complimentary copy of our Business Continuity Instructions fillable PDF . 

How Can A Charitable Lead Annuity Trust (CLAT) Help Me Attain My Business Exit Goals?

Minimizing taxes, based on our experience, seems to be a “core value” shared by most, if not all, business owners. And, seldom are they more cognizant of potential tax burdens than when transacting a sale of their business. Many owners are also characterized by generosity toward others through charitable giving.

A CLAT, or Charitable Lead Trust, is an Irrevocable Trust designed to provide financial contributions to one or more charities for a specified period of time, with the remaining assets eventually being distributed to family members or other beneficiaries. A CLAT also provides an owner with estate and income tax benefits that can be particularly helpful in the year of a business sale. For example, our fictional business owner Sarah successfully sold her business this year. Following are a few key data points:

• The payout in the year of sale is significant as she is in control exiting on her own terms and conditions. She built a sellable business.

• As a result of the large payout this year, she also has income and estate tax problems. Her exit goals include minimization of both income and estate taxes.

• Not only has Sarah been impactful through her business, but also through her generous and strategic giving to favorite charities through the years. She wants to increase giving with sale proceeds.

• Along with personal values that she wants to transfer to heirs as part of her legacy, she also has financial legacy goals. So, she would like for a portion of her charitable trust assets to eventually return to her family and beneficiaries.

• Due to her comprehensive planning process, Sarah has been able to sell her business on her own terms and conditions and have strategies in place to accomplish her tax minimization, charitable giving, and legacy goals — one tool playing a role in her strategy is the Charitable Lead Annuity Trust (CLAT). Sarah’s Charitable Lead Annuity Trust will provide her with both income and estate tax benefits, and work to accomplish her charitable and legacy goals.

If you’re a business owner like Sarah in the year of selling your business and have goals of minimizing estate and/or income taxes, charitable or philanthropic goals, and financial legacy goals, establishing a CLAT could play a key role in your comprehensive plan. Also, the current interest rate environment is particularly suited for CLATS as they are most effective when rates are low.

Check with your estate planning attorney and/or CPA, or contact us to see if a CLAT would be the right strategy for you. You can also learn more in our ExitReadiness® PODCAST episode with Estate Planning Attorney Jonathon Morrison of Ryan Frazer Goldberg & Arnold.

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

2021 Exit Planning Checklist

All business owners will stop being business owners at some point.  So, there is no better time to begin planning for the inevitable than the present.  The earlier you begin planning, the more options you will have for a successful exit.

However, like any strategic plan, it can be difficult to know how and where to begin.  As we wrap up 2020, it's also an ideal time for us to publish a basic "To-Do List" that will serve you in considering that most significant event as a business owner...your future exit. 

DECIDE WHERE YOU WANT TO GO.  Establish Clear Goals and Objectives for Exit and Your Life After Exit.

• When do you want to leave the business? Whom do you wish to transfer/sell the business to?

• What are your values-based and legacy exit goals?

• What is your post-exit "life-plan"? Business owners can often regret leaving when lacking a plan for life that replaces the sense of purpose and meaning they experienced in building their business.

• Update your Personal Financial Plan. Find out how much $$$$ you will need post-exit to do all you want to do. Is there a gap?

ASSESS WHERE YOU ARE.  Without Accurate Data All Planning Becomes Meaningless.

• Get an accurate Business Valuation. If the business is your largest asset shouldn't you know what it really is worth to potential buyers?

• Assess your business Value-Drivers and areas of Risk.

• Review your Business Continuity Plan for life transitions and unexpected death or disability. Co-Owners would include a review of their Buy-Sell Agreement to ensure alignment with the current goals of all owners.

• Review your Estate Plan to ensure alignment with exit goals.

DESIGN AND IMPLEMENT A PLAN.  Build Transferable Value and Enjoy a Future Exit On Your Own Terms and Conditions.

• Which Exit Route will best accomplish your goals? Sale to Third-Party | Sale to Insiders | Transfer to Family Members | Sale to ESOP | Absentee Owner.

• Focus on growth and profitability today. At the core of tomorrow's successful exit plan is today's profitability and plan for growth.

• Strengthen business value drivers. An owner with a sellable business will have more freedom in life and options for exit.

• Update a strategic financial plan for business growth.

• Do you have the right Team of Experienced Advisors in place for your plan design and implementation?

• Who will Manage the Exit Planning Project? You, a current Advisor, or an experienced Exit Planner?

The most important thing you could do in 2021 would be to GET STARTED AND GET HELP if you have yet to do so.  If you wait until you're ready to exit to begin planning, you won't be ready and neither will your business.  Keep in mind, that "You don't know what you don't know" and, like in all other areas of life, that could end up being disastrous. 

There is much at stake during this most significant event in your life as a business owner.  Take steps in 2021 to be as successful in planning your eventual exit as you have been in running your business. 

Following are some Easy Next Steps:

Contact Us Today for a No-Obligation Exit Planning Exploratory Meeting.  Take our Free ExitMap Readiness Assessment and get Online Learning and Resources at exitreadiness.com.

Exit Planning and Marathon Runners

“Eat well and exercise!”

Just about everyone over 30 has heard this advice from someone interested in our health, usually a doctor.  We all know that we should begin by doing SOMETHING, yet we wind up not really doing anything.  We know deep inside that if we want to live long and prosper, taking a few painful steps will have long-term pay-offs, but all too often those first few steps never happen.

What has this got to do with Exit planning? 

Business owners know they should be taking steps to plan for the future, but all too often they don’t seem to get around to it.  With each passing year comes the thought, “I’ll get to that.” But, like the good intentions for diet and exercise, the longer one waits, the harder it gets.

How Exit Planners Help Businesses Get In Shape

            Exit planners are a bit like personal trainers.  What personal trainers do for fitness, exit planners do for businesses. They take a look at the shape a business is currently in, and develop plans to improve that business until it is in optimal condition, usually so that the business can be transferred or sold in such a way that the owner remains in control of the sale.  A business in less than optimal condition often means that the owner will lose some of control of the sale to the whims of the buyer.

Dream Big

            A middle-aged person who develops a dream to run a marathon soon finds that just reading about marathons is not enough to get in the race. Still, if they never dream the marathon dream the race has no chance of being run at all.

            Business owners who intend to sell also should not hesitate to dream big, even if they do not plan to sell for five or ten years. Big dreams mean big accomplishments.  Every business owner should dream big about two things:

1. The ultimate objectives (financial, personal, family, and/or philanthropic goals) for leaving the business.

2.  The “transferable value,” of that business, which should ensure that the owner does not have to go with the business when it is sold.

Set Small, Achievable Goals

            Like someday wanting to run a marathon, dreams are easy to write down, but need diligent daily work to achieve.  They will not happen on their own. Whether you a baby boomer nearing retirement, in the middle of your career enjoying the excitement, or just at the very start of a venture, taking these simple steps will prepare you for the future:

1.         Get help to develop a “workout plan.” Just as it can be helpful to get a personal trainer involved when you begin to exercise, the same is true for business planning.  It's a complex process that requires specific knowledge in certain areas (legal, financial, estate planning, human resources, etc.) to ensure your business gets in optimum shape.  

2.         Set simple goals - Simple goals when one begins exercising help to prevent accidental injury, and the same is true for exit planning.  Three simple, easily achievable goals are:

a.     Determine how much money you need, or want, for retirement

b.     Decide when you want to leave your business

c.     Identify the person, or persons, to whom you want to transfer the business

3.         Start slowly – you can't rush getting into great physical conditioning, and you can’t rush the business planning process. Set realistic goals and act on them one by one.

4.         Stay steady and consistent - sticking with the plan and taking small, consistent steps will pay off.  Make time in your busy schedule to do the essential steps.  

5.         Measure progress - in order to ensure you're making progress toward your goal you’ve got to measure it. Setting 90-day goals allows manageable progress and the ability to celebrate the small wins.  

As you work hard in the business day-to-day, take the necessary time to prepare for tomorrow - starting your exit planning program now will maximize your quality of life in the future.

Get started today with our FREE Exit Readiness Assessment.

Wealth Management for Small Business Owners

Small business owners are at times neglected by the wealth management community as the business is commonly (not always) the owner’s largest asset rather than a portfolio of stocks, bonds, and mutual funds. You’d be well-advised as a business owner to engage a Financial Advisor who is proactive and experienced in factoring your future plans for the business into your overall plan for managing your wealth.

Impactful wealth management for you as a business owner would include at least these elements of exit planning:

• Clarifying what “exit” means to you. For example, do you want to leave entirely at some point, or gradually over time?

• Clarifying your financial, values-based, legacy goals, and what role the business needs to play in attaining your goals.

• A financial needs and gap analysis with an accurate valuation (not back of the envelope - meaningful planning requires accurate data) of the business. How much $$$$ will you need to do everything you want to do after the business? Is there a financial gap? Will that gap need to be closed by increasing the value of the business?

• Personal risk management including asset protection, insurance planning, tax planning.

• A current estate plan — a business owner cannot do exit planning without doing estate planning.

• A plan to preserve the value of the business (typically a small business owner’s largest asset), and a plan for it to survive during unexpected events of your permanent disability or death.

• An appropriate plan for managing financial assets resulting from the successful sale or transfer of your business.

Exit planning is wealth management for business owners that requires assessing, preserving, and building the value of your largest and most complex asset…your business.

Contact us at email@ennislp.com for assistance in building sellable business value or planning your eventual exit. Please also consider investing 15 minutes in completing our FREE Exit Readiness Assessment. We do not ask for confidential information.

Test Your Assumptions About Exit Options

Five years ago we met with the owner of a successful business who told us he wanted to exit in the next few years. When asked if he knew who he wanted to sell the business to, he responded: “I guess I will sell to a third-party buyer”. He didn’t at all seem excited about that, so with further questioning, we learned that he was moving ahead under the assumption that a sale to a third-party was his only option. We also discovered that his real desire was to sell to a key employee who had been instrumental in building the business, and a son working in the business. Also, he had already spoken to a strategic buyer who was interested in buying his business and expanding into the area.

In 2019 with our help he successfully sold his business to the key employee and his son. The moral of this story is to test your assumptions pertaining to how you will eventually exit your business. And, it’s best to have an expert test those assumptions…because you don’t know what you don’t know, and you may not even recognize where you’re making assumptions. Our client assumed he would not be able to sell his business to whom he wanted to, and had actually started down a path that he really didn’t want to travel down. With the right help, his assumptions were identified and tested, and in the end, he was able to do what he really wanted to do.

Identifying and then testing assumptions is essential for a successful exit. Our client realized what he really wanted to happen because he took the first step in seeking expert assistance. You can get started today with our FREE Exit Readiness Assessment.

email@ennislp.com | 301-859-0860

State Death Taxes and Exit Planning

We continually communicate to clients and prospective clients that as a business owner “you cannot do exit planning without doing estate planning, and you cannot do estate planning without doing exit planning.” Meaning that, as you plan your estate preservation and transfer in life and death, your business certainly needs to be under consideration, and if you are in the midst of creating your business exit strategy, you will quickly find that you will need to create or review your estate plan.

One of the many reasons to regularly review your estate plan is to be clear on death taxes (estate, gift, inheritance), and how your estate could be impacted. The current good news is that most small business owners don’t need to be concerned about federal estate taxes. For 2020, your estate would need to be worth $11.5 million or more ($23 million or more for a married couple) to be affected by federal estate taxes. For this reason among others, not a few owners choose to neglect estate planning, while there are other important factors to consider (i.e., asset protection; medical directives; lifetime transfers, etc.).

One such additional factor is the potential estate tax bill assessed by the state you reside in. For example, in Maryland, the estate tax exemption is less than half ($5 million for 2020) than the federal exemption, and the tax rate assessed can be up to 16%. Massachusetts has the lowest threshold of any state in 2020 of $1 million. The point is, you really need to understand, not just how you could be impacted on a federal level but also your state death tax structure. If you’re unclear, contact your estate planning attorney for a plan review.

Following is a link to a related Kiplinger article dated November 2019 (note: some states listed may have made changes in 2020) on the “18 States With Scary Death Taxes”.

Again, if you are at all unclear on your situation and how you could be impacted, contact your estate planning/tax advisor.

Please contact us for assistance in building sellable business value or planning your eventual exit. You could also check out our virtual planning solutions at exitreadiness.com.

Goalposts, Goals and Your Business Exit

In this week’s episode of our ExitReadiness® PODCAST, we interviewed negotiation expert Randy Kutz of Scotwork USA on “key ingredients of a successful negotiation”, with an owner’s sale of their business in view. One of Randy’s main points had to do with “goals and goalposts”, and how an owner’s goalposts can continually move during a sale transaction if they don’t have strong convictions about their goals and objectives heading into the negotiation process. This uncertainty can easily result, and often does, in either seller’s remorse or a deal not getting done.

We have found in working with owners, that when giving any thought to their inevitable exit, they will often have a time frame for leaving the business (i.e., 5 years) and “their number”, or sale price in mind, but even these objectives haven’t been thoroughly tested and evaluated. Goals such as tax minimization, a plan for life after the business, care for key or important employees, sustaining the culture they’ve worked hard to create, family harmony, leaving on their own terms and conditions, may have received a head nod along the way, but frequently get little to no planning attention ahead of a potential transaction.

As a business owner, there is never a more critical event or time to be clear about what you want than when you exit your business. A reason being, there is a tremendous amount at stake…all that you’ve built…all that stakeholders have come to depend on…and all of your financial and values-based goals are at stake when you transition out of the business. And, you could at any time find yourself suddenly facing an offer from a potential buyer so it’s advisable to begin gaining clarity well in advance so that you can indeed move forward with conviction. If you’re not clear on what you want and need financially, what you value in regard to the future of your business in the hands of a new owner, or what you will do post-business to replace the significance and impact you’ve experienced as a successful owner, the likelihood of you experiencing regrets is quite high.

It is essential to “crunch all of the right numbers'“ in any transaction, and it is also critical to do the hard and often neglected “soft skills” work of establishing firmly your goalposts for a successful and satisfying business transition. Contact us at email@ennislp.com or 301-859-0860 for assistance.

Access the ExitReadiness® PODCAST with Randy Kutz HERE.

Invest 15 minutes and get a FREE Exit Readiness Assessment HERE.

What Exit Route Should You Choose?

There are not many absolutes in owning a business, but there is one thing that is absolutely certain….all business owners will stop being business owners at some point…100%. Along with death or permanent disability, the following are routes for leaving your business:

1. Sale to one or more key employees.

2. Sale to one or more co-owners.

3. Sale or transfer to children or family members.

4. Sale to an Employee Stock Ownership Plan (ESOP)

5. Sale to a third party (full or partial).

6. Become an absentee owner.

7. Engage in an IPO.

8. Liquidate for asset value and close the doors.

As you would expect, there are advantages and disadvantages to each of these exit routes, and other than liquidation, each can require much planning and time to execute in a way that will accomplish all of your values-based as well as financial goals. Certain exit routes will lend toward a higher financial payout, while others afford more control for values-based goals like sustaining culture and care for employees.

We believe that it’s imperative for business owners to understand all available exit routes and the particular characteristics of each, and how they align or misalign with their goals for the future.

Begin increasing your knowledge today with our Exit Routes eBook. You can download it for FREE on our ExitReadiness® site under PRODUCTS.