How Can A Cash Balance Plan Help With My Exit Goals?

If your goal is to exit your business at some point in the next ten years, you should answer these questions as soon as possible:

• When in the next 10 years do I want to leave or exit?

• How much $$$$ will I need (net of taxes) to do everything I want to do after the business?

• To whom do I want to sell the business…third-party, insiders, children/family, ESOP?

• Is my business sellable? For how much?

• What is my plan for life after the business? (Most owners are miserable within two years of exit because they didn’t have a post-exit life plan).

You may decide to head down one of the following paths once you thoroughly answer these questions and others like them:

• Over the next ten years you decide to work hard to maximize the sellable value of your business (having a goal of selling for top dollar in the next 10 years), while at the same time accumulate as much $$$$ outside of the business as possible — in order to maximize your exit route options.

• After learning that you would need to invest much more time and money for your company to be sellable, and decide that you don’t have the energy for that, you might also decide that simply “closing the doors” and liquidating for asset value in 5 years will be your exit strategy — but in the meantime you will , “sock away” as much $$$$ as you can in savings and investments outside of the business.

• Maybe you have a professional practice (i.e, Attorney, Dentist, M.D., etc.) with neither a clear successor option or potential buyer, and you definitely want to exit within the next 5 years.

In all of these scenarios and others like them, where the owner wants to maximize savings outside of the business, a Cash Balance Retirement Plan could be an effective tool, if certain parameters are met, in accomplishing that objective.

A Cash Balance Plan is an IRS Qualified Retirement Plan that affords participants the ability to accumulate money for retirement in amounts well beyond the 401k and Profit Sharing contributions. If your comprehensive plan for exit includes maximum asset accumulation outside of the business, you should consider the pros and cons of a Cash Balance Plan and how it might serve in accomplishing your goals. If you need help contact us. You can also access further information by listening to Episode 29 of our ExitReadiness® PODCAST with guests Financial Advisor Erik Fromm and Retirement Specialist Les Risell of Janney Montgomery Scott.

Invest 15 minutes and take our exit readiness questionnaire. We do not ask for confidential information and you will receive a 12-page report scoring you in four key planning areas.

"Five Years...That's When I'm Planning to Leave..."

We refer to it in the exit planning trade as the "perpetual five-year exit plan".  When asking a business owner when they plan to exit their business, the following is a fairly common response:  "Not sure but probably about five years from now..."  And it’s not unusual to get the same response year after year from the same owner.  There can be numerous and varied reasons for the response, but a lack of planning is often primary. 

The problem is that if you don't begin planning now, you and your business may not be ready for you to exit in five years, and it could end up being necessary for you to plan and wait for another five years in order to attain your goals.

In our effort to help you avoid the perpetual five-year plan, the following is our "2021 Exit Planning To-Do List" we posted at the end of last year to help you get started. 

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 current goals of all owners.

• Review 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.

• Update strategic financial plan for the business.

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

• Who will Manage the Exit Planning Project?

Following are some easy next steps:

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.

Contact us for an exploratory conversation if you need help in designing or implementing your plan for a successful exit.