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Forbes
10-08-2025
- Business
- Forbes
Before You Sell, Ask If Your Business Can Survive Without You
There's a moment every founder eventually faces: the realization that they won't always be at the helm. For some, it comes with the thrill of a pending sale. For others, it arrives more gradually, through shifting priorities or generational change. In either case, how a founder exits their business says as much about their vision as how they built it. Yet most never make it that far. According to the Exit Planning Institute's most recent national survey, only 42% of business owners have a formal, written transition plan in place. That lack of preparation can stall sales, create internal instability, and ultimately jeopardize the future of the business. Succession planning serves as a critical safeguard for everything a founder has built. It provides structure in moments of transition, clarity in times of uncertainty, and a long-term path forward for the people and priorities that matter most. Without it, even the most promising ventures can lose direction the moment their founder steps away. Start early, not urgently One of the most common mistakes founders make is waiting too long to plan. Succession isn't something to tackle once retirement is six months away or when a partner unexpectedly steps back. The most successful transitions are often those planned years in advance, with robust frameworks, such as buy-sell agreements or well-structured trusts, to clarify how the business will be valued and transferred when the time comes. These structures do more than document a plan; they preserve relationships, reduce uncertainty, and help prevent chaos during personal or professional pivots. If a founder waits for the transition to feel urgent, the advantage has already been lost. Valuation reveals the full value of what you've built Figuring out what a business is really worth during a transition is rarely straightforward—and often overlooked. Founders sometimes lean on outdated numbers or quick formulas that miss the real value they've created. But when the time comes to step away, a careful, expert-led valuation can make all the difference in ensuring a fair and seamless handoff. 'Beyond the numbers, we look for the full picture,' says Thomas A. Greenwald, a family law attorney at Goranson Bain Ausley who frequently handles high-net-worth business asset divisions. 'That means understanding brand value, customer relationships, intellectual property, and the less visible assets that drive long-term success. If those factors are overlooked, you risk undervaluing the legacy you're trying to preserve.' Greenwald's perspective reflects a broader truth: Valuation is about more than financial statements. Intellectual property, brand equity, customer loyalty, vendor contracts, and even company culture often contribute value that won't show up on a balance sheet. These elements are especially critical in family-related transitions, where fairness and clarity are essential. Getting the valuation right ensures that a founder's exit honors the full scope of what they've built, and gives everyone involved a clear, confident path forward. There's more than one way to exit Many founders default to the idea of selling the business outright, but that's far from the only option. Internal buyouts, phased transitions, and co-ownership arrangements are often better aligned with preserving operational continuity and core values. Some founders choose a phased exit and stay on as an advisor while gradually handing over responsibilities. It's a way to pass down not just leadership, but institutional knowledge and culture. Others shift ownership to family members or longtime employees, using thoughtful, tax-aware planning to protect both the business and the people involved. What matters most is exploring these options early, while there's still room to plan with intention rather than pressure. Planning with people in mind Business transitions often stir up more than operational changes. For many founders, stepping back means reshaping their daily lives and sense of purpose. That shift can be hard to navigate without a plan that considers the people involved as much as the process. Clarity and communication go a long way. When a transition is handled with care, it can preserve relationships, steady the team, and keep the business moving forward. What matters most is preserving the core of the business while leadership shifts. Thinking ahead in an evolving landscape Succession planning is no longer just a retirement exercise. Today's entrepreneurs face emerging complexities: digital asset protection, continuity in remote operations, evolving tax laws, and more. Waiting for a major life event to trigger planning increases both risk and complexity. Proactive transition planning shows investors, teams, and future leaders that the business is built for longevity.
Forbes
30-07-2025
- Business
- Forbes
Why Entrepreneurial Wealth Is Really About Freedom, Not Just Profit
Meredith Moore is the Founder & CEO of Artisan Financial Strategies LLC. She is fascinated by the interplay between gender, money and power. We don't start businesses just to work harder. We start them to gain more control—over our time, our income and our lives. But somewhere along the way, that freedom gets lost in the grind. Revenue might be up. You may be hiring. But if every decision still routes through you, are you actually free? The truth is that business success without personal freedom is just another job—one you can't even quit. Revenue Isn't Enough: Freedom Requires Structure Entrepreneurs often chase growth thinking it'll eventually lead to more flexibility. But without the right structure, more revenue can just mean more responsibility. Creating recurring revenue—retainers, subscription models, management fees—is one of the simplest ways to buy back your time. When cash flow doesn't require your presence, freedom becomes possible. People Are The Linchpin Time freedom is directly tied to team design. If your business can't run without you, then you are the bottleneck. I worked with a founder who built an eight-figure company, yet she hadn't taken a real vacation in years. The turning point wasn't revenue—it was building a leadership layer. Once we pointed out that design flaw, she was able to correct it, and less than a year later, she took a two-week unplugged trip. The business not only survived but grew. According to the Exit Planning Institute, owner dependence is one of the biggest drags on business value: 'A business that is dependent on the owner will never reach full value potential.' Ironically, the less your business needs you, the more valuable it becomes—and the more freedom you create. Liquidity Means Options Many business owners have all their net worth tied up in the business. That's risky not just financially, but emotionally. Freedom comes when you have access to clickable capital—money you can move with the click of a mouse. Think cash reserves, brokerage accounts, cash value insurance and business liquidity. You need assets you can tap quickly when life moves. Building economic value outside of your business is key because, on average, 80% of most business owners' net worth is locked inside the business itself. Liquidity gives you breathing room. It gives you clarity. And most importantly, it gives you choices. Exit Visibility Isn't Optional Even if you're not planning to sell anytime soon, you should be thinking like an owner who could. It starts with knowing your valuation drivers, cleaning up your financials and building a succession path. These aren't just exit strategies. They are freedom strategies. In 2023, 75% of business owners said they plan to transition in the next 10 years. But do these leaders have a written plan or advisory team in place? Most owners wait too long and are forced into exits they didn't design. Whether your future looks like an employee stock ownership plan or a strategic sale, the best outcomes go to the owners who started planning five to 10 years out. Here's an example: A client of mine with a $2 million professional services firm believed she was in good shape for an exit maybe a decade later. But once we reviewed her value drivers and mapped out a succession plan, we uncovered operational risks tied to her constant presence. By building a sales process and elevating team leads, she freed herself from daily involvement in the short term and built real enterprise value. Freedom Isn't A Fantasy—It's A Design Problem We tend to romanticize freedom like it's a 'someday' reward for hard work. But freedom isn't a finish line. It's a natural consequence of having the right elements in place: • A system • Recurring revenue • Transferable operations • Liquidity • Exit visibility These are the pieces that buy back your time—the most valuable asset of all. You can rebuild wealth. You can grow again. But you can't get time back. Forbes Finance Council is an invitation-only organization for executives in successful accounting, financial planning and wealth management firms. Do I qualify?
Forbes
29-07-2025
- Business
- Forbes
8 Business Valuation Mistakes And How To Avoid Them
Business man in suit with cityscape montage. The man is unrecognizable and you cannot see his face. ... More He is superimposed onto a city skyline at sunset. He is holding a telescope looking into the city. Success, vision concept with copy space. getty For high-net-worth individuals and business owners, obtaining an accurate business valuation is a cornerstone of effective estate planning. Whether planning for succession, considering a sale, or structuring wealth transfer strategies, a professional valuation performed by an accredited specialist can significantly impact your estate's value and tax efficiency. This critical step, based on precise modeling and comprehensive analysis, helps maximize wealth preservation and transfer strategies. In this article, we'll explore eight critical business valuation mistakes that could impact your legacy planning and wealth transfer strategies. Understanding these common pitfalls is essential for high-net-worth individuals, family business owners, and their financial advisors as they navigate the intricate landscape of estate tax planning and business succession. As part of a comprehensive estate planning strategy, obtaining a professional business valuation is crucial for long-term wealth preservation and succession planning. It ensures the business is ready for triggering events such as Buy-Sell Agreements, provides insight for estate planning to address tax implications, and aids in securing loans or attracting employees. Furthermore, a credible valuation allows for targeted value enhancement adjustments across operations, marketing, legal, and personnel, potentially boosting profitability and the eventual sale price. Selecting an experienced valuator skilled in such enhancements can streamline the process effectively. Unfortunately, a large percentage of business owners do not prepare a plan for the eventual sale of their company. According to a report by the Exit Planning Institute, many business owners' "lack of readiness prevents them from harvesting the value of their business..." Of those surveyed, 91 percent lacked a written personal plan of action following the transition of their business, and 30 percent never gave it a thought. More commonly, business owners wait until the eve of the sale to commission a valuation. By doing so, they may be unable to hire the best possible professional valuator. Moreover, since time is of the essence, the ultimate valuation prepared in haste may be lacking. A credible business valuation requires expertise and should be conducted by a qualified professional such as those certified by organizations like ASA, AICPA, or NACVA. While brokers and CPAs may offer valuation services, they often lack the specialized knowledge necessary for reliable results. This is especially critical in legal disputes, where valuations prepared by uncertified individuals are more likely to be challenged and discredited during a Daubert Challenge (which is a judicial process scrutinizing an expert's credentials and, therefore, the valuation's accuracy). Mistake #4: Neglecting the Power of Financial Statements Accurate and up-to-date financial statements are crucial for a proper business valuation. Business owners must ensure that their financial records are well-maintained and reflect the true financial health of the company. Inaccurate or outdated financial statements can lead to an undervaluation or overvaluation of the business, which can have significant financial implications. Market conditions play a vital role in determining the value of a business. Business owners should be aware of the current market trends and how they can impact the valuation of their business. Ignoring market conditions can result in a valuation that does not reflect the true market value of the business. Mistake #6: Undervaluing Intangible Assets Intangible assets, such as intellectual property, brand reputation, and customer relationships, can significantly impact the value of a business. Business owners should ensure that these assets are properly valued and included in the overall business valuation. Overlooking intangible assets can lead to an incomplete and inaccurate valuation. Mistake #7: Overlooking Tax Consequences Business valuations play a crucial role in estate tax planning and wealth transfer strategies. High-net-worth business owners must carefully consider how valuations impact estate tax liability, gift tax consequences, and generation-skipping transfer taxes. Working with experienced estate planning attorneys and tax advisors is essential to optimize valuation strategies and minimize potential tax burdens. Failing to properly structure business valuations within your estate plan could result in significant tax exposure and reduced wealth transfer efficiency. Mistake #8: Treating Valuation as a One-Time Event A business valuation should not be a one-time event. Business owners should update their valuations regularly to reflect changes in the business and market conditions. Regular updates ensure that the valuation remains accurate and relevant, providing a reliable basis for decision-making. Conclusion For high-net-worth individuals and business owners, avoiding these critical valuation mistakes is essential for effective estate planning and wealth preservation. A professional business valuation, conducted by qualified experts and regularly updated, serves as a cornerstone for strategic decision-making, tax efficiency, and successful wealth transfer. By understanding and addressing these common pitfalls, you can better position your business for long-term success while maximizing the value of your estate for future generations. Consider working with experienced estate planning professionals who can help navigate these complexities and ensure your business valuation aligns with your broader wealth management objectives. Thank you to Evan Levine and Nainesh Shah of Complete Advisors for their help and expertise in drafting this article
Forbes
09-07-2025
- Business
- Forbes
How To Diversify Financially As A Small Business Owner
Statistics show 80% of business owners have the majority of their wealth tied up in their business. ... More Here are 3 financial diversification strategies for the small business owner. Diversification poses a real challenge for the small business owner. The reality is, the average entrepreneur has far too much of their wealth tied up in the business, which poses a great risk financially. Although total diversification is likely improbable and unrealistic for an active entrepreneur, there are ways to reduce your concentration. Here are three financial diversification strategies for the small business owner. Top 2 Reasons Why Business Owners Need To Diversify According to the 2023 National State of Owner Readiness Report by the Exit Planning Institute: To further illustrate the importance of diversifying, just consider how the valuation might change for a small business manufacturing facemasks in early 2019 versus one or two years later. On the other hand, imagine what the DOGE cuts might mean for a consulting company whose sole client is the federal government. It is so important to focus on what you can control, as uncontrollable factors can happen at any time and work for or against you. Like real estate, a business is an illiquid asset. Having a high savings rate, a plan in place, and outside liquidity can greatly reduce risk. 3 Practical Strategies On How to Diversify As A Business Owner Until (or unless) you sell your business, full diversification is unlikely. But some diversification is achievable, and for the majority of business owners, it's a worthwhile endeavor. It is important to note that not all businesses, or entrepreneurs, are alike. Some small businesses, particularly services businesses built around the skills or reputation of the primary owner may not be salable. In those cases, it is less about managing risk until a major sudden wealth event when the business is sold. Instead, the focus is more towards utilizing profits and managing expenses to maximize liquid assets along the way. Diversify Around Your Business As a business owner, you already have a concentrated stock position in your own company. Since this asset is 100% equity, entrepreneurs planning to exit their business at some point may want to consider adjusting the rest of their portfolio around their major holding. Consider tailoring the allocation of your investment accounts depending on the relative value of the business versus your other assets, your risk tolerance, etc. In some situations, it may make sense to overweight or exclusively hold less risky investments (e.g. bonds versus stocks) in brokerage or retirement accounts. United States Treasury securities are considered the safest investments. The bond market is deep, so investors may also want to consider diversifying their fixed income portfolio, for example using investment grade corporate bonds or municipal bonds. Another way for small business owners to diversify around their business is by tailoring their equity portfolio to overweight sectors or regions that are uncorrelated with the nature of the business or exclude firms in the same sector. Cash Management Diversification is all about reducing risk. With cash, the biggest risk is typically the loss of purchasing power over time, as interest rates may not keep pace with inflation. For small business owners, having liquidity to get through a rough patch is an essential part of staying in business. Business owners need to keep more cash than W-2 employees. Figuring out what that number is can be quite challenging as the issue is twofold: the company's cash needs and your own personal reserves, which are separate. Business cash As entrepreneurs know, managing cash flow using only a profit and loss statement will lead to trouble. As with many things in life, timing is everything. Keeping a spreadsheet or model to forecast income and expenses, updated with actuals, can help tremendously. Don't forget to include distributions not directly related to business expenses, such as withdrawals to pay personal quarterly tax payments or K-1 distributions, particularly if you have partners. Every business will need a different cash buffer beyond working capital, depending on volatility of income and costs, fixed expenses, seasonality, margins, and so forth. Short-term cash reserves should be held in a interest-bearing checking or money market account. For ongoing rainy day funds or matching significant longer-term liabilities, consider other options such as the fixed income securities mentioned above or even just a high-yielding money market fund. Personal cash As with everything in personal finance, exactly how much cash you need is personal. Consider factors like your assets, current liquidity, household income, etc. Having enough liquidity can help business owners diversify financially and reduce the risk that short-term hurdles become real problems. As a general rule-of-thumb, consider keeping at least one year of necessary personal expenses in cash. One-income households or businesses that don't have adequate cash reserves yet may require the business owner to stash more cash. Diversify By Adding To Your Outside Assets Whether or not you expect a large windfall from selling your business, one of the best ways for small business owners to diversify financially is by having a high savings rate and ongoing dedication to investing outside of the company. Remember, a lot can happen before a successful exit. There are several ways to add to your outside assets and diversify as a business owner: The business will grow at a different rate than your personal assets. If you expect to sell at a big multiple, it is likely that your outside assets won't ever eclipse the value of the business pre-sale. But through ongoing diversification efforts, business owners can improve their liquidity and build their contingency retirement plan, just in case. Work On - And In - The Business Most entrepreneurs are so consumed keeping up with the day-to-day that they lack the time for strategic planning. This includes defining their business goals, current value of the firm, ways to diversify the company's revenue streams, and other key performance indicators (KPIs). Busy operators should consider working with business consultants that can help advise on growth, operations, and exit strategies, as well as help with ongoing accountability to ensure plans are implemented. The word is spreading. The Exit Planning Institute's study reports that 62% of respondents in 2023 completed a formal pretransition value enhancement or due diligence project in the last two years. Megan Kearney, Partner at Exit Factor in Lexington, MA, regularly helps coach and support business owners in these areas. She notes that "without strategic preparation, a business is statistically unlikely to sell successfully." Most businesses lack a dedicated business advisor, leaving a sizable advisory gap in a typical professional team which includes legal and accounting/tax on the corporate side and a wealth advisor, estate planner, and tax advisor on the personal side. Although there's often 'creep' from the personal side to the business, the personal advisors are not going deep or wide into the firm's operations, profitability, workflows, and so forth. Building a team with a shared mission can make all the difference. Kearney notes, "Diversification is critical, building value beyond the day-to-day operations can not only expand exit options but also safeguard owners' future wealth." Other Considerations Aside from diversifying, there are a number of other planning items that entrepreneurs must consider as it relates to their company and personal situation, though a complete discussion of these issues is outside the scope of this article. It is easy to push these items to the bottom of the to-do list. But the reality is, exit is top of mind for most business owners. The 2023 survey reported 49% of respondents want to exit within the next five years and 75% with in 10 years. Entrepreneurs seeking to transition within five years may want to consider attending this upcoming webinar on exit planning. Final Word On Financial Diversification For Small Business Owners The focus of this article has been on how to diversify financially as a small business owner while running the company. But it is worth repeating the statistic on how many entrepreneurs plan to sell their business, and how few are able to. The best way to combat this risk is to start planning your exit, transition, or succession plan early. Get a valuation done, understand the market and what metrics can improve the sale price, and meet with business brokers. This will help inform your perspective on what risks you face and what approach to diversifying makes the most sense for you and your business.
Fast Company
25-06-2025
- Business
- Fast Company
Aging entrepreneurs face new policy hurdles. Here's how to help
Americans love small businesses. We dedicate a week each year to applauding them, and spend Small Business Saturday shopping locally. Yet hiding in plain sight is an enormous challenge facing small-business owners as they age: retiring with dignity and foresight. The current economic climate is making this even more difficult. As a professor who studies aging and business, I've long viewed small-business owners' retirement challenges as a looming crisis. The issue is now front and center for millions of entrepreneurs approaching retirement. Small enterprises make up more than half of all privately held U.S. companies, and for many of their owners, the business is their retirement plan. But while owners often hope to finance their golden years by selling their companies, only 20% of small businesses are ready for sale even in good times, according to the Exit Planning Institute. And right now, conditions are far from ideal. An economic stew of inflation, supply chain instability, and high borrowing costs means that interest from potential buyers is cooling. For many business owners, retirement isn't a distant concern. In the U.S., baby boomers—who are currently 61 to 79 years old—own about 2.3 million businesses. Altogether, they generate about $5 billion in revenue and employ almost 25 million people. These entrepreneurs have spent decades building businesses that often are deeply rooted in their communities. They don't have time to ride out economic chaos, and their optimism is at a 50-year low. New policies, new challenges You can't blame them for being gloomy. Recent policy shifts have only made life harder for business owners nearing retirement. Trade instability, whipsawing tariff announcements and disrupted supply chains have eroded already thin margins. Some businesses—generally larger ones with more negotiating power—are absorbing extra costs rather than passing them on to shoppers. Others have no choice but to raise prices, to customers' dismay. Inflation has further squeezed profits. At the same time, with a few notable exceptions, buyers and capital have grown scarce. Acquirers and liquidity have dried up across many sectors. The secondary market, a barometer of broader investor appetite, now sees more sellers than buyers. These are textbook symptoms of a ' flight to safety,' a market shift that drags out sale timelines and depresses valuations—all while Main Street business owners age out. These entrepreneurs typically have one shot at retirement, if any. Adding to these woes, many small businesses are part of what economists call regional 'clusters,' providing services to nearby universities, hospitals, and local governments. When those anchor institutions face budget cuts— as is happening now —small-business vendors are often the first to feel the impact. Research shows that many aging owners actually double down in weak economic times, sinking increasing amounts of time and money in a psychological pattern known as ' escalating commitment.' The result is a troubling phenomenon scholars refer to as ' benign entrapment.' Aging entrepreneurs can remain attached to their businesses not because they want to, but because they see no viable exit. This growing crisis isn't about bad personal planning; it's a systemic failure. Rewriting the playbook on small-business policy A key mistake that policymakers make is to lump all small-business owners together into one group. That causes them to overlook important differences. After all, a 68-year-old carpenter trying to retire doesn't have much in common with a 28-year-old tech founder pitching a startup. Policymakers may cheer for high-growth ' unicorns,' but they often overlook the ' cows and horses ' that keep local economies running. Even among older business owners, circumstances vary based on local conditions. Two retiring carpenters in different towns may face vastly different prospects based on the strength of their local economies. No business, and no business owner, exists in a vacuum. Relatedly, when small businesses fail to transition, it can have consequences for the local economy. Without a buyer, many enterprises will simply shut down. And while closures can be long-planned and thoughtful, when a business closes suddenly, it's not just the owner who loses. Employees are left scrambling for work. Suppliers lose contracts. Communities lose essential services. Four ways to help aging entrepreneurs That's why I think policymakers should reimagine how they support small businesses, especially owners nearing the end of their careers. First, small-business policy should be tailored to age. A retirement-ready business shouldn't be judged solely by its growth potential. Rather, policies should recognize stability and community value as markers of success. The U.S. Small Business Administration and regional agencies can provide resources specifically for retirement planning that starts early in a business's life, to include how to increase the value of the business and a plan to attract acquirers in later stages. Second, exit infrastructure should be built into local entrepreneurial ecosystems. Entrepreneurial ecosystems are built to support business entry (think incubators and accelerators) but not for exit. In other words, just like there are accelerators for launching businesses, there should be programs to support winding them down. These could include confidential peer forums, retirement-readiness clinics, succession matchmaking platforms, and flexible financing options for acquisition. Third, chaos isn't good for anybody. Fluctuations in capital gains taxes, estate tax thresholds, and tariffs make planning difficult and reduce business value in the eyes of potential buyers. Stability encourages confidence on both sides of a transaction. And finally, policymakers should include ripple-effect analysis in budget decisions. When universities, hospitals or governments cut spending, small-business vendors often absorb much of the shock. Policymakers should account for these downstream impacts when shaping local and federal budgets. If we want to truly support small businesses and their owners, it's important to honor the lifetime arc of entrepreneurship—not just the launch and growth, but the retirement, too.
