Your Business: Will it Have a Happy Ending?

“Begin with the end in mind,” says Stephen Covey in his book
Seven Habits of Successful Living. Those who have created a
successful business know it does not happen without planning,
hard work, and a little luck. Yet most have no plans for leaving
their business, ever. Entrepreneurs are optimists, but all of us
will stop work one day. The truth is that most business
relationships do not have a happy ending. The question is: Will
it happen as I want or will it just happen?

Research in the UK indicates that 75 percent of small to
medium-sized businesses have no exit strategy. In Canada, 92
percent of entrepreneurs say it is a good idea to have an exit
strategy, but only 44 percent actually have one. In the US, more
than 20 percent of small industrial business owners had not even
thought about exiting their businesses. Even professionals like
physicians, dentists, and veterinarians are ill prepared for
exiting their practices. A survey of this group indicated that 96
percent believed that poor planning left them unable to exit
their businesses on their own schedule.

Life shows us that we have to depend on ourselves. Yet we
continue to believe someone else will someday take care of us.
We will live on Social Security and income from the business that
we created. The idea that your business will strive on to
provide you income after you are no longer there is to believe
that you have money in a Social Security account. Your company
will not work for you after you are gone and there is no money in
your account with Social Security. Still, we believe. It is time
to look at reality.

You will leave your business in one of four ways. I call it the
“The Four Ds of Leaving:” death, disability, divorce and
departing. To have a successful business, you must plan for all
Four Ds.

For the individual each one of the Four Ds has special demands on
family, income, taxes and transfer of control of assets. The
concern of the business is different. Your business is a
separate entity and your concerns for family and income will
conflict with the business desire to continue. The solution to
the problem is mutually fair agreements and enough money.

Fair agreements that take in the concerns of all parties
negotiated at the beginning of a business relationship will allow
the participants to handle transitions when relationships change.
And relationships will change. The agreements, commonly called
buy/sell agreements, are used to handle the Four Ds.
Unfortunately, many buy/sell agreements only address death at the
urging of a life insurance agent. At the meeting, you
arbitrarily decide how much insurance you can afford and how much
your company is worth, when in fact you do not know.

Death is not as likely to end the business relationship as
disability. If the person is important to the business, the
financial strain is felt as keenly by the business as by the
family who depended on the income. If the business is faced with
choosing between survival or paying the disabled partner, it will

You can imagine the torn feelings if a disability occurs, but
what if the partners cannot get along? How do we split a
partnership without financially ruining each other? It may be
complicated by many personalities, some may not even be a part of
the dispute, yet may be affected financially.

You may all be happy working together, but your partner or you
may decide to leave for another opportunity or simply to take
life easier. Who is going to do the work? What is owed the
leaving partner? Where is the money coming from?

A number of questions cannot be handled in this article, but
there are certain things that must be done:

– The business needs to be incorporated into a formal
relationship that legally recognizes that you and your business
are separate entities

– Devise a method determining the value of the corporation that
can be done at least annually and will qualify under IRS

– Develop an employee benefit plan that will assist with the
departure of each partner in case of death, disability, or

– Finally, if we cannot get along or simply want to leave, who
gets the company and who gets paid off and in what manner?

If you think these decisions are hard now, try to make them in
the heat of the moment. You have to think as if you are the one
who wants to leave as well as the one who wants to stay. It is
not easy.

The “Great American Dream” is to create a business of your own;
to bring it to life and make it successful, financially. A truly
successful business is one that makes you financially
independent. How you leave will determine your financial success
and that of your family. Just as building a successful business
takes planning, hard work, and a little luck, so does leaving it.

About the author: Brent Dees, CFP, CSA is president of Brent Dees
Financial Planning,, and a registered principal
with Financial Network Investment Corporation. He is one of only
a handful of advisors in the nation who has both the certified
financial planner and the certified senior advisor designations.