As a financial advisor, small business owners are some of my favorite clients. Few people have more flexibility in how they earn, manage, and preserve wealth. But that flexibility only helps if it’s used intentionally.
That can be tough. The day-to-day demands of running a business create a “tyranny of the urgent,” where long-term thinking consistently gets cast aside. Exit planning becomes something owners intend to address eventually, but rarely do until circumstances push the issue.
One of the advisor’s most important roles is helping owners bring structure to these decisions and start planning before outside forces dictate their outcomes. A recent survey conducted by Equitable and SCORE found that six in 10 small business owners find it difficult to fully retire. Yet owners who work with a financial professional retire up to seven years earlier than those who do not.
The process often starts by asking better questions and helping owners focus on what matters most first. Here’s how financial advisors can get these discussions off the ground.
Too often, advisors begin with retirement or valuation targets before establishing the lifestyle and goals those numbers are meant to support.
This can create real friction. Owners nearing the one-yard line of a transaction sometimes hesitate when confronted with a simple question: What will my life look like after running the business? Advisors who help clients articulate that vision, whether it involves philanthropy, mentoring, investing, travel, or another venture, will be setting them up for better results and greater fulfillment.
After all, growing a business and stepping away from one require very different mindsets. The same “don’t look down” mentality that helps entrepreneurs build successful companies can later become a barrier to realistic transition planning. One of the advisor’s most important tasks is facilitating this shift.
Once that first question—what will life look like after the business?—is answered, advisors can help owners find structure with two more concrete questions: What is the business worth? How much will you need to retire?
Advisors can do more than just ask these questions, however. Important steps to recommend include:
Start with valuation. Too many owners rely on what I call a “country club valuation”—informal assumptions based on what they’ve heard other businesses sold for—rather than a current, objective assessment of value. Even owners who know their numbers often focus more on the “tax number,” or income managed to minimize taxes, than the business’s true earnings power from a buyer’s perspective. Getting that accurate number is a critical first step.
Define the retirement gap. Advisors can help owners understand the difference between existing personal assets and the level of wealth needed to support their lifestyle after they sell the business. That conversation often extends beyond retirement income to include healthcare costs, future ventures, charitable goals, or family priorities. Once owners understand the gap between where they are and where they need to be, planning becomes significantly more actionable.
Build toward the transaction. Advisors can also help clients identify operational risks that may reduce valuation, including poor financial organization, customer concentration, undocumented processes, or excessive dependence on the owner. In many cases, improving enterprise value is less about growth than reducing a buyer’s uncertainty.
Identify successors early. Rather than simply hoping the right buyer materializes at the right time, owners are often better served developing potential successors years before a transaction occurs. In some cases, that may involve recruiting and nurturing future leadership internally rather than relying on an external buyer to emerge. In any case, earlier planning creates greater flexibility and leverage.
Diversify. Many owners overinvest in their business, leaving their long-term financial security dependent on a single future transaction. Gradually building wealth outside the company through investment accounts and retirement structures can create far more flexibility around exit timing and transition planning. When owners are forced into rushed exits, they often lose negotiating leverage. Markets have a way of sensing desperation, which can reduce value at precisely the moment owners are most dependent on the proceeds.
The same freedom that allows owners to make decisions independently, structure taxes strategically, and build wealth creatively also means responsibility for every major decision ultimately falls on them. Trying to manage all of those variables simultaneously is where so many owners get stuck.
That is what makes the advisor essential. Effective exit planning often requires collaboration among advisors, CPAs, attorneys, and other specialists, but financial advisors are uniquely positioned to act as quarterback and help owners think about the full picture. More than offering recommendations, the job is helping owners ask better questions, prioritize decisions, and balance short-term business realities with long-term transition goals.
In many cases, advisors simply need to help owners stop reacting to the business long enough to think clearly about the kind of life they actually want to live once it’s out of their hands.
Stephen Dunbar III, JD, CLU, is executive vice president at the Georgia Alabama Gulf Coast Branch, Equitable Advisors where he and his team are focused on helping individuals, families and businesses achieve and sustain financial stability.
This article, which has been written by an outside source and is provided as a courtesy by Stephen B. Dunbar III, JD, CLU (AR Insurance Lic. #15714673), Executive Vice President of the Georgia Alabama Gulf Coast Branch of Equitable Advisors LLC, does not offer or constitute, and should not be relied upon, as financial, tax, accounting, or legal advice. Equitable Advisors LLC and its affiliates do not make any representations as to the accuracy, completeness or appropriateness of any part of any content hyperlinked to from this article. Your unique needs, goals and circumstances require the individualized attention of your own tax, legal, and financial professionals whose advice and services will prevail over any information provided in this article. Stephen B. Dunbar III offers securities through Equitable Advisors LLC (NY, NY 212-314-4600), member FINRA, SIPC (Equitable Financial Advisors in MI & TN), offers investment advisory products and services through Equitable Advisors LLC, an SEC-registered investment adviser, and offers annuity and insurance products through Equitable Network LLC (Equitable Network Insurance Agency of California LLC). Financial professionals may transact business and/or respond to inquiries only in state(s) in which they are properly qualified. AGE-8939959.1(05/26)(exp.05/30)
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