In October, my firm was presenting in Seattle at a national contractor trade show on exit planning. We presented to about 70 audience members including approximately 15 spouses in attendance.

After the presentation was completed, we were walking through the trade show exhibitor’s floor and were stopped by several attendees who thanked us for the presentation and made the following comments:

Wife: “I did not realize how many owners failed to exit their business. We need that money to retire and we have not done any exit planning.”

Husband: “Thanks a lot. Now my wife is all over me to get an exit plan.”

Wife: “My husband keeps saying he has a plan but now I realize he has some pieces done but not a coordinated plan or retirement date.”

I think it’s safe to say that the wives that attended the presentation will put a new priority on an exit plan to protect the family’s wealth, their retirement lifestyle and have their husband’s commit to a plan.

To be perfectly fair to their partners, planning for the exit is complicated, especially when the owner is preoccupied with the day-to-day business. But, there’s only one certainty — the owner will exit the business — voluntarily or involuntarily.

Further, the wife should be concerned since she’ll likely outlive her husband. The exit plan will relieve the worry and financial stress that preoccupies a lot of baby boomers — retiring and not running out of money.

Spouses of owners have watched their husbands or wives invest their life in building a successful business. Now these baby boomers are thinking about retirement. The critical question is: What’s your plan to capture over 70 percent of your illiquid wealth trapped inside your business?

According to a recent Small Business Administration study, “Seventy-five percent of the typical business owner’s net worth is tied up in their company. Only 22 percent of those owners have reported doing any succession planning.”

“At any given time, 40 percent of U.S. businesses are facing the transfer of ownership issue. The primary cause for failure … is the lack of planning.”

So, where’s your plan and how are you going to exit without being clobbered by taxes, retire, not outlive your money or change your present lifestyle?

My view is, you need a plan to visualize the numbers required for financial independence and to know what steps to take so that you can harvest the wealth trapped in the business while protecting your financial future and estate. An exit plan will create that blueprint to guide you through this complicated process based on your personal and business goals.

When you can visualize your financial independence, it’ll be much easier to deal with your emotional attachment to the company and focus on your succession and retirement goals. Only then can you decide how and to who you’ll sell your company; outside to a competitor or consolidator or inside to your employees, management or family. An exit plan can lead you through this process while helping you understand the various paths, values and tax consequences.

Everyone thinks this is just a financial decision. I know from my personal experience of selling a 200-employee company that it’s also a very emotional decision. You just don’t spend over thirty years or more of your life working sixty-plus hour weeks and seeing your associates more than your family without an emotional tie to the business you’ve built. Simply, it’s not just what you do, but who you are.

I’m sure you’ve witnessed many successful business owners (affluent) who had a great lifestyle, no exit plan, fumble the ball in the red zone and exit by liquidation or with 10 percent of the value of their business.

These are the facts:

• 70 percent of a business owner’s wealth is trapped in their illiquid business.
• Only 30 percent of those businesses will transfer to the 2nd generation and only 10 percent of that 2nd generation will successfully transfer to the 3rd generation (Family Firm Institute).
• Fewer than 20 percent of the companies brought to market sell (U.S. Chamber of Commerce).
• Taxes can consume anywhere from 0-60 percent or more of the proceeds from the sale of your business.

Most owners don’t know these risks and are just too busy running their business. Unfortunately, consequences of procrastination could lead to liquidation of their company for pennies on the dollar, resulting in an irresponsible legacy for their spouse, family and business.

Again, thank you ladies for waking up your husbands to deal with the sweat equity trapped inside their illiquid business and their eventual exit so you both can enjoy your retirement without having to worry about running out of money.