Business owners planning for a successful future should always begin by identifying and understanding their primary objectives for themselves, their families, their ownership and their businesses.  Key objectives include:

  • The date you wish to exit;
  • The amount of cash you want upon exit; and
  • Your choice of successor.

For this coaching tip, let’s look carefully at that second objective: How much cash must your ownership of the business deliver in order to enjoy a financially secure post-business life? For most owners this is a great starting point for determining when, or if, they can leave their businesses on their own timeline and on their own terms.

The Issues

Joan was the 58-year old owner of Oleander Data Analytics, Inc. She had engaged her financial advisor to:

  • Set a realistic assumption for a rate of return on her investments;
  • Research actuarial information to determine average life expectancies for both she and her spouse; and
  • Help her and her spouse agree on and establish an acceptable post-exit annual income amount.

As part of this process, Joan and her advisor reached the critical question whose answer would determine Joan’s ability to retire on her terms: What must the value of Joan’s business be if Joan is to leave, as she desires, at age 63?

Like Joan, your resources are likely both in the business and outside of it. You need to know the value of both so you can determine if there is a gap between the amount of money you will need in the future and the amount you have today. If you have enough to secure your financial future, your planning will go in one direction.  If you don’t have enough for complete financial freedom, your planning will go in another direction.  Both scenarios are fine, but you’ll want to know which one fits your situation.  Any gap must be quantified and—to exit successfully—you must create and implement strategies to close that gap. Most owners retain an experienced financial planner to help with this project.

The Process

Joan and her advisor used the following process:

First: Joan and her spouse agreed on their future annual income needs.

Second: Joan and her advisor, using their agreed-upon estimate of a projected rate of return, calculated how much Joan’s non-business investment assets would be worth at Joan’s desired exit date.

Third: Joan’s advisor calculated the amount of investment capital needed to pay Joan and her spouse the target income per year for the duration of their lives (based upon current actuarial tables and assumed reasonable, maybe even conservative, investment returns). This amount needed to be net of taxes, since Joan intended to use it for spending.

The Bottom Line

When the business falls short of the value needed to achieve your financial targets, you should consider working with a business coach to build business value that achieves your goals.  When the business value meets your needs, you turn your attention to other goals and objectives, such as taking care of loyal employees, leaving a legacy in your industry and your community, focusing on the “What’s next?” question.  You either have it or you don’t.  Keep in mind that neither circumstance eliminates the need for planning.

Contact our firm for help in organizing the right advisors to determine your business’s current value and the gap (if any) between what you have today and what you’ll need in order to exit on your terms. We can help you to understand your ultimate objectives and what you must have (and must do) to reach them.

The Cornerstone team includes former C-Level executives, successful entrepreneurs and advisors who offer unmatched experience in delivering advanced, custom-tailored, results-oriented solutions for business leaders. As a member of the Business Enterprise Institute (BEI), Cornerstone is an authorized distributor of BEI’s content and Exit Planning Tools.  We developed the Performance Culture System™ to help clients implement best practices and drive high performance throughout their organization. For more information, visit, call 910-681-1420, or email