Smart Planning vs. Gambling Your Net Worth
By Jack Lyons
President, Lyons Solutions LLC
During the last downturn, many businesses let people go, moved to less and more affordable office space, cut expenses back substantially and looked for new ways to generate revenue from both existing and new customers. Maybe you’re one of these people that took decisive action to keep or get your company on solid financial footing. If you are, congratulations! You’ve survived the worse for now.
Planning Questions Worth Considering
Even though the economy seems to be pointing to continued improvement for 2012, there are a couple of planning questions that you should probably consider. Questions like “What will I do next?” and “How much longer do I want to work?” and “Should I consider selling out during this up-cycle we are in or should I gamble my net worth on the next downturn?”
The fact that you made it through the last downturn shows that you have a survival instinct, which also worked well for you while you were growing your business. Unfortunately, you’ll need a lot more than survival instincts to successfully exit your business because a successful exit usually doesn’t fit with the “I’ll do it my way” strategy.
Two Common Mistakes of the “Doing It My Way” Strategy
1. Not planning for the taxation that will occur when a business is sold. C-Corps are usually taxed at a substantially higher tax rate than S-Corps or LLCs if an asset sale takes place. If you own a C-Corp, have you taken steps to assure that you can sell the stock of the company when you sell? If you haven’t, you could be risking a substantial tax consequence. There are also steps one can take to minimize taxes in a sale, but these must be planned for long in advance of the actual sale.
2. Not getting the timing right. Are you asking yourself “How much longer do I want to work?” If so, you’ve had time to recover from any mistakes made in the past. But as you near the time that you no longer want to work – or maybe can’t work – every critical decision and tactic you implement will be of much greater importance because it will have a greater impact on your net worth…much of which is tied up in your business if you’re like most business owners. Whether you realize it or not, you’ll become more of a gambler than you were in the past if you leave little time before you decide you “want out.”
Remember…up-cycles are always followed by downturns. Since the current up-cycle hasn’t been very strong by historical standards, do you really want to gamble your net worth on timing the next downturn?
To discuss a smart plan for your business, call Jack Lyons at (941) 497-4700.
© Copyright 2011 Jack Lyons. All Rights Reserved.