The amount of human capital you have (the aggregate value of your earning capacity) decreases every day. Because everyone will eventually either retire or die, human capital is limited. Business owners face a particularly perplexing conundrum; how to convert both their human capital and business ownership value into financial resources available for retirement.
Blind Spots
The mental makeup required to start and operate a successful business does not usually translate into the mindset needed to
create a realistic exit strategy. Many business owners have significant blind spots when it comes to their businesses. They sometimes believe that the business is worth far more than may actually be the case and that this value can easily and directly be transferred to others.In many instances, business owners are rugged individualists and resist any mention of the possibility that one day they might need to pass on the business ownership (and leadership) to others.The several year period of time that precedes retirement is one where the need for planning is at its peak for everyone. This is especially true for business owners. Missteps and mistakes during this period often have long-lasting impact.Related:
14 Equations for a Sound Financial Life Transition Is Coming
Business owners have more things to worry about than others. What keeps many business owners awake at night is
how to transition their business and its core value. What is critical to understand is that this transition will happen one way or the other.With proper planning and coordination with their personal financial situation, the transition can be positive. Without planning... likely not so positive. Start there.
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