The following guest post was authored by Andy Miller, CPWA at Robert W. Baird & Co.

It is not uncommon for business owners to have their business represent a significant portion of their net worth and take up much of their time. After all, running a business is demanding and time-consuming. While some owners never want to exit – they want their funeral and retirement party to be the same day – many just don’t have the capacity to think beyond the month or quarter. And because the lines between business and personal life often blur, it can be challenging to optimize both.

Step One: Take Stock of You (and Your Business)

A good place to start exploring your personal goals and objectives is through a discovery process with a wealth manager where you flesh out your values, goals, important relationships, assets, and interests. This will provide the framework for getting some clarity on your priorities.

Once you have completed the discovery process, it is time to look at how your business can help you accomplish your personal goals. The first step would start with evaluating your business, which often looks like:

  • Revisiting Your Operating Agreement: Is it reflective of your ownership today? Are there estate planning provisions to account for? Is there a definition of the valuation methodology to be used for your business?
  • Reviewing Your Valuation: Oftentimes, only considered when it is time to exit your business or in succession planning, an up-to-date valuation can also help inform your total wealth plan, facilitate adding new partners, or secure new financing.
  • Assessing Your Risk Management Strategy: Is there enough coverage to protect the business without paying excessive premiums? Do you have a plan in place to ensure the business is able to operate if an owner is deceased or incapacitated? Are you protecting your “key persons”?
  • Reevaluating Employee Compensation: Are you using the right levers to reward your valued employees, without sacrificing future growth of the organization?

Step Two: Plan for the Business Owner

You’ve invested everything into your business—now it’s time to invest in you. This step is about ensuring your personal financial future is just as structured and intentional as your business plan. With the outcomes of your discovery meeting and in partnership with a wealth manager, an owner can reflect on what they need for their own personal life. That’s explored through:

  • Determining Your Wealth Gap: I.e., How much wealth do you need to support your personal and financial goals vs. what you currently have (including the value of your business and value of any assets outside your business)? How will you close the gap?
  • Building a Multi-year Tax Strategy: Going beyond individual tax filings and thinking about your wealth across multiple years, and the strategies to employ.
  • Reviewing Any Estate Planning: Ensuring it accounts for your business holdings and is reflective of your wishes.
  • Planning for the Worst: Thinking about you and your loved ones, should things not go to plan. Assessing your insurance coverage for your family and exploring liquidity options to leverage in downturns.

Step Three: Prepare for the Next Chapter

For those owners who do, in fact, want to separate their retirement party from their funeral, it’s important to explore options for how to exit the business and what to do when you exit. Some considerations include:

  • The steps and measures you can take to maximize the value of your company prior to sale.
  • Exit approaches (third-party sale, selling to partners, family transfer, management buyout, ESOP), and assessing how your exit impacts your personal financial plan.
  • For families, it’s also managing the family dynamics of these shifts, whether it’s the sentiment around a family transfer of ownership or a significant liquidity event.

There are many components to exiting that impact both the business and the owner. It’s often recommended to begin planning for an exit two to three (or more) years ahead of the transition.

Closing Thoughts

It may feel overwhelming to read through all the considerations and trade-offs, but truthfully, we have only scratched the surface. The good news: You don’t have to go it alone. As a wealth manager, I often serve as a quarterback for my clients: managing the complexity throughout all the phases of their life and business, and bringing their visions to life. And, true for any quarterback, they work within a team. Not only do I work with my clients’ team of professional advisors: accountants, attorneys, and business advisors, but I also bring in my extended team of experts who specialize in estate, tax, insurance, and business planning to ensure we optimize the future health and success of both business and business owner.

If you have any questions about your personal wealth plan, please visit my website. You can also schedule a 30-minute Ask Me Anything session where I can help to answer any questions that are on your mind.