Small business owners are the backbone of economic life in Muskoka. However, owning a business is much more than just a “job” and knowing how and when to move on while maximizing your investment can be complicated.
“Something like 80% of a typical small business owner’s wealth is locked up in the business itself. The question is – How do you unlock that value?” says Jeff Barnes, a financial advisor with Edward Jones, who recently earned his Certified Exit Planning Advisor (CEPA®) designation. “People have worked extremely hard to build up the value of these small businesses and when it comes time, they should be able to reap the fruits of that labour.”
Barnes, a former small business owner himself, says his personal experience and professional training work in combination to help him advise Muskoka business owners – who make up a significant part of his practice.
“A CEPA® advisor focuses not just on the moment of sale but on the process of getting prepared for that sale,” says Barnes who moved to Gravenhurst over 25 years ago to open his first business, and now works with Edward Jones in Bracebridge. “My job is to help business owners figure out how all the pieces of their puzzle fit together – personal, financial and business. How do you get your business to a stage where it can be both attractive and ready for a transition?”
Barnes says ideally that process should begin three to five years before the actual sale takes place.
“I was just speaking with someone this morning who is a small business owner and about five to 10 years away from retirement – that is a great time to start thinking about the process,” says Barnes. “There are a multitude of projects you can chip away at to help increase the value of your business. These can help make the business more profitable operationally while also building long term value for an eventual exit”.
Barnes says small business owners are understandably focused on the day-to-day aspects of running their business, but he suggests by taking a step back and trying to figure out how they can increase the value of their business they can achieve both objectives.
“Income is primarily about creating a comfortable living wage. Most small business owners invest their time and money so they can create a better life for themselves and their family,” says Barnes. “From a buyer’s point of view, they should be able to eventually walk into the business and connect the dots on how they can run this business successfully.”
Barnes says an equally important, but often overlooked, part of planning that exit strategy is knowing what you want to do in the next phase of your life. “Retirement is often about new opportunities and finding new sources of enjoyment. The value locked in your business can help to to bridge the wealth gap between your dreams and financial realities.”
“Create a bucket list of your future goals and work with a financial professional you trust on your long-term strategies,” he says.
Barnes says it can also be challenging mentally to go from investing so much time and effort in a business into retirement. Creating balance in your personal life can be just as important as planning for your future financially.
“Data from the Exit Planning Institute tells us that approximately 75% of all small business owners say they later regretted selling their business,” he says. “For a lot of those people they were simply lost without their business, and hadn’t successfully planned for their exit. That balance between personal and business life just wasn’t there before they sold their business. You need to be prepared for your life after business. Plan to achieve what you want to achieve and then make your peace with it.”
Barnes says on any given week he’s working with several small business owners in Muskoka who are at various stages of the business ownership cycle. The process can be daunting but Barnes says if all the pieces are put in place beforehand the result can be both financial stability and peace of mind.
“Most people are only ever going to do this once in their life. If you only get one shot at it, you want to make sure you do it right.”
Barnes encourages anyone with questions to drop into his office on Manitoba St, give him a call at 705-645-4844, or visit his website www.edwardjones.ca/jeff-barnes .
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