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Should you stay in charge or leave the business?

Kelly Kowalski, Cliff Noreen, and Bronwyn Shinnick

Posted on August 24, 2022

Our executives and experts team up to write educational articles, covering a variety of financial topics such as life planning, college savings, and retirement.
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Explain why a business owner should start the decision-making process early.

Point out why some business owners stay for the wrong reasons, while others have the wrong reasons for choosing to leave.

Detail the advantages that working with a financial professional can bring to the process.

How do you envision your future as a business owner? Are you someone who never wants to retire and plans to run the business for as long as you possibly can? Or do you dream of exiting the business, selling it, and settling into a comfortable retirement filled with the people and personal pursuits you enjoy the most?

There are a myriad of questions you’ll want to ask yourself – and answer—before you reach a decision about whether to stay in charge or leave. To have as many options as possible, start the decision-making process early. You may need three to five years to prepare your personal finances and increase the value of your business. While every owner’s circumstances are unique, the best decisions have one thing in common: They are mutually beneficial for the owner, the owner’s family, and the business.

“If you decide to keep running the business, make sure it’s because you want to, not because you have to,” said Brian Trzcinski, director of business market development at MassMutual. “Staying merely for financial reasons, such as not having enough retirement income, is absolutely the wrong rationale. In a case like this, staying may benefit you and your family, but if your heart isn’t in the job, it probably won’t be advantageous for the business.” (Related: Is the business your baby or your lifestyle?)

Just as some business owners decide to stay for the wrong reasons, others have the wrong reasons for choosing to leave.

”Feeling tired and frustrated, having business challenges that you don’t want to deal with, and wanting the business to be someone else’s problem, are all poor reasons to leave,” Trzcinski pointed out. “While the owner may benefit personally, leaving won’t be beneficial to the business. In this case, the owner needs to rein things in, get the problems under control, and make sure the business is healthy before they transition.”

Chuck Richards, CEO of CoreValue, a leading business evaluation software company, believes that “the best outcomes are those that connect the plans you make for your business with your personal financial life.” He tells clients to “think of the business as an asset and connect it to their personal dreams and interests.”

“I’ve had clients who felt they HAD to grow the business to the next level”, he said. “I remind them there are trade-offs and pursuing that goal will change their lifestyle. I say: ‘You’ll be a CEO who has no time to enjoy being an owner. You’ll be traveling constantly and your homelife will suffer. Is that what you really want?’”

Life after leaving

Chris Vanderzyden, a principal with Legacy Partners, LLP, recommends that business owners design their post-ownership life before making a decision to leave.

“If they’ve run the business for a long time, their identity is wrapped up in it. It’s been their whole world.” she explained, adding that she helps clients envision the future without the business. “I ask them what they’re going to do to sustain themselves emotionally and socially. How do they plan to spend their time? Do they plan to participate in mentorship and volunteer work?”

Lacking the emotional readiness to give up ownership may be a contributing factor to the 75 percent of sellers who regret their decision. Within 12 months, these individuals begin to question whether they made the right deal and worry that they won’t have enough money to support their retirement goals. Being emotionally or socially unprepared for the change in lifestyle may not be verbalized, but it’s a factor in their discontentment. (Related: Retirement planning: A major blind spot for business owners)

It’s common for owners to waver between preferring to stay and wanting to leave. Richards tells a story of one client who was tired of the business and intent on selling. Surprisingly, when that owner put time and energy into increasing the value and salability of the business, he started having fun again. He not only stayed, he decided to grow the company.

Of course, some owners don’t exit the business voluntarily. It’s estimated that 50 percent of all exits are involuntary. Although disability, death, and divorce may take the decision out of an owner’s hands, any plans and preparations they’ve made will be critical to the family’s financial security and the fate of the business. It’s just one more reason to start the decision-making process sooner rather than later.

Whether you ultimately stay in charge or leave for greener pastures, it should be the right choice for you, your family, and your business. Consider consulting with a financial professional who can take a holistic view of your life and help you see the big picture as well as the details.

Talk to Us

Your MassMutual Financial Professional can answer your questions about exit planning and assist you in envisioning the future, exploring options, and positioning your personal finances and business to offer freedom and flexibility in your decision-making. Contact us today.

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The information provided is not written or intended as specific tax or legal advice. MassMutual and its subsidiaries, employees, and representatives are not authorized to give tax or legal advice. You are encouraged to seek advice from your own tax or legal counsel. Opinions expressed by those interviewed are their own and do not necessarily represent the views of MassMutual.