E175: Financial Advisor Tyson Ray Discusses the Importance of Exit Planning for Business Owners - Watch Here

About The Guest(s): Tyson Ray is a founding partner of Form Wealth, a financial advisory firm that specializes in exit planning for small to medium-sized businesses. He has extensive experience in helping business owners navigate the complexities of selling their businesses and planning for retirement.

Summary: In this episode, Ronald Skelton interviews Tyson Ray, a financial advisor and exit planning expert. They discuss the importance of involving a financial advisor in the process of buying or selling a business, and the role they play in helping business owners plan for retirement. They also touch on the challenges that business owners face when it comes to understanding the financial implications of a sale and how to make the most of the proceeds.

Key Takeaways:

• It is crucial for business owners to start planning for their exit at least three to five years before they intend to sell.
• Financial advisors can provide valuable insights and guidance on how to maximize the value of a business and plan for retirement.
• Business owners should consider the emotional and psychological aspects of selling a business, as well as the financial implications.
• It is important to involve a financial advisor in the process of selling a business to ensure that the proceeds are managed effectively and aligned with the owner's long-term goals.

Quotes:

• "Financial advisors need to stop selling last week's lotto numbers for a fee and start focusing on the bigger picture." - Tyson Ray
• "Selling a business isn't an overnight thing. It requires careful planning and consideration of various factors." - Ronald Skelton
• "The more time we have, the more options we have. The shorter time we have, the less options we have." - Tyson Ray
• "Your business is worth more if your plan is in place. Your employees are more loyal if the plan is in place." - Tyson Ray
• "The biggest mistake business owners are making is letting the urgent crowd out the important." - Tyson Ray

Articles:

How Financial Advisors Can Add Value in Business Exit Planning

As a financial advisor, I have come to realize the importance of being involved in business exit planning. Many business owners often overlook the need for financial advice when it comes to selling their businesses. They focus solely on the sale price and fail to consider the taxes, legal fees, and other expenses that will impact their net proceeds. This lack of financial planning can lead to disappointment and financial strain for business owners who are not adequately prepared for the financial implications of selling their businesses.

In my experience, it is crucial for business owners to start thinking about their exit plan well in advance. Ideally, they should begin the process three to five years before they plan to sell. This allows them to address any financial issues, maximize the value of their businesses, and ensure that they have a solid plan in place for their post-sale financial future.

During the early stages of a business, it is important for entrepreneurs to consider the potential risks and uncertainties that may arise. By identifying these risks and implementing strategies to mitigate them, business owners can protect their businesses and ensure a smooth transition in the event of an unexpected event.

One common mistake that business owners make is assuming that the sale of their business will provide them with enough money to retire comfortably. They often fail to consider the taxes, legal fees, and other expenses that will eat into their net proceeds. This can lead to a rude awakening when they realize that the actual amount they will receive is much smaller than they anticipated.

To avoid this situation, it is crucial for business owners to work closely with their financial advisors to develop a comprehensive financial plan that takes into account all the potential costs and expenses associated with selling their businesses. This includes working with their CPA to understand the tax implications of the sale and developing a strategy to minimize their tax liability. It also involves working with their attorney to ensure that all legal requirements are met and that their interests are protected throughout the process.

In addition to addressing the financial aspects of the sale, it is also important for business owners to consider the emotional and psychological impact of selling their businesses. Letting go of their businesses can be a challenging and emotional process.

Financial advisors can play a crucial role in helping business owners navigate these emotional challenges and develop a plan that aligns with their personal and financial goals. This includes helping them understand the financial implications of the sale, exploring different options for structuring the sale, and developing a post-sale financial plan that ensures their long-term financial security.

By taking a holistic approach to business exit planning, financial advisors can add significant value to the process. They can help business owners maximize the value of their businesses, minimize their tax liability, and develop a comprehensive financial plan that aligns with their personal and financial goals. This not only ensures a smooth and successful transition but also provides business owners with peace of mind knowing that their financial future is secure.

One important aspect of business exit planning is structuring the sale in a way that allows business owners to save and invest their proceeds wisely. As one speaker in the transcript mentioned, "You're supposed to be saving half of it for the many, because that's their estate and you're not." Business owners need to consider how much money they will need to retire comfortably and how to invest their proceeds to generate the cash flow they need.

Another speaker in the transcript highlighted the importance of working with a financial advisor to structure the payment of the sale. They mentioned, "Which accounts and how much do you want in each account? Because if they tell me, I'll send it all of this, I'm like, who's advising you on the back end?" This emphasizes the need for business owners to work closely with their financial advisors to determine the most advantageous payment structure and ensure that their interests are protected.

Furthermore, the transcript discussed the potential benefits of a sell-leaseback arrangement for business owners. One speaker shared a case where the owner sold the business but retained ownership of the real estate and leased it back. This allowed the owner to receive a premium on the property and continue to generate income from it. Such creative strategies can be explored with the guidance of a knowledgeable financial advisor.

In conclusion, financial advisors have a unique opportunity to make a significant impact in business exit planning. By taking a holistic approach and addressing both the financial and emotional aspects of the process, they can help business owners navigate the complexities of selling their businesses and ensure a successful transition. By working closely with their clients and other professionals, financial advisors can help business owners develop a comprehensive financial plan that maximizes the value of their businesses and ensures their long-term financial security.

It is important for business owners to recognize the value that financial advisors bring to the table and to seek their guidance early on in the exit planning process. By doing so, they can avoid common pitfalls, maximize their financial outcomes, and achieve their personal and financial goals. With the right financial advisor by their side, business owners can confidently navigate the journey of selling their businesses and secure a prosperous future.

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