How can business owners plan for an exit?

Submitted by Edward JonesPrint Story | Email Story
If you're a business owner, you always have a lot to do and a lot to think about. But have you put much thought into how you'll eventually leave it all behind? 
 
Even if you're a few years away from that day, it's a good idea to create an exit strategy. If you're like most other owners, most of your net worth may well be tied up in your business — so how you exit that business can have a big impact on your finances and your retirement.
 
As you begin the exit strategy process, you'll need to examine some basic questions, such as how much you want for your business and how much it's worth. But you'll especially need to plan for the mechanics of your exit — that is, just how you're going to sell or transfer ownership of it. 
Essentially, you have three main options:
 
  • Internal sale or transfer – You could sell or transfer your business to someone affiliated with the company, such as a family member, business partner or even a group of employees. The advantages of this method are that you'll have greater control over the timing of your exit, and you'll be able to provide greater continuity for your employees, clients and suppliers. One potential disadvantage is that your net sales proceeds may be less than what you'd get from selling the business to an unrelated third party. 
  • External sale or transfer – The biggest benefit of selling or transferring your business to an unrelated third party is that you can potentially maximize your net sales proceeds. But you'll need to consider some tradeoffs, too. For one thing, a sale to an outside person or business usually requires a long and possibly expensive due diligence process. Also, you'll have less control over the timing of your exit than you would if you sold the business to an internal source. 
  • Liquidation – If you liquidated your business by selling all your assets and shutting down operations, you could end up with far fewer net proceeds than if you sold the business to an internal or external source. However, you could raise cash pretty quickly. But if you chose to liquidate or dissolve your business, it could potentially be disruptive for your employees, clients and suppliers.
Because everyone's situation is different, there's no clear-cut formula for deciding which of these exit options is right for you. And it isn't simply a matter of numbers, either, because you'll need to consider some intangible factors, too. How will your family be affected by your choice? How would you feel if your business was in someone else's hands, or no longer existed? You'll need to work out these issues, along with the financial ones, before you decide on your business exit strategy.
 
Fortunately, you don't have to go it alone. You may want to consult your financial, legal and tax advisors, and possibly work with a commercial banker and a business evaluation expert. By drawing on several sources of expertise, you can feel more confident that you'll make a decision that's appropriate for your needs.
 
One final suggestion: Don't wait too long before you begin putting together your exit strategy. Time goes fast — and when the time comes for you to say goodbye to your business, you'll want to be prepared.
 
This article was written by Edward Jones for use by your local Edward Jones financial advisor. Courtesy of Rob Adams, 71 Main Street, North Adams, MA 01247, 413-664-9253.. Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. For more information, see This article was written by Edward Jones for use by your local Edward Jones financial advisor. Courtesy of Rob Adams, 71 Main Street, North Adams, MA 01247, 413-664-9253.. Edward Jones, its employees and financial advisors cannot provide tax or legal advice. You should consult your attorney or qualified tax advisor regarding your situation. For more information go to www.edwardjones.com/rob-adams.
 
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How can women bridge the retirement gap?

Submitted by Edward Jones

March 8 is International Women's Day, a day for celebrating all the accomplishments of women around the globe. But many women still need to make up ground in one key area: retirement security.

Women's challenges in achieving a secure retirement are due to several factors, including these:

  • Pay gap – It's smaller than it once was, but a wage gap still exists between men and women. In fact, women earn, on average, about 82 cents for every dollar that men earn, according to the Census Bureau. And even though this gap narrows considerably at higher educational levels, it's still a source of concern. Women who earn less than men will likely contribute less to 401(k) plans and will ultimately see smaller Social Security checks.
  • Longer lives – At age 65, women live, on average, about 20 more years, compared to almost 17 for men, according to the Social Security Administration. Those extra years mean extra expenses. 
  • Caregiving responsibilities – Traditionally, women have done much of the caregiving for young children and older parents. And while this caregiving is done with love, it also comes with financial sacrifice. Consider this: The average employment-related costs for mothers providing unpaid care is nearly $300,000 over a lifetime, according to the U.S. Department of Labor — which translates to a reduction of 15 percent of lifetime earnings. Furthermore, time away from the workforce results in fewer contributions to 401(k) and other employer-sponsored retirement plans.

Ultimately, these issues can leave women with a retirement security deficit. Here are some moves that can help close this gap:

  • Contribute as much as possible to retirement plans. Try to contribute as much as you can afford to your 401(k) or similar employer-sponsored retirement plan. Your earnings can grow tax deferred and your contributions can lower your taxable income. (With a Roth 401(k), contributions aren't deductible, but earnings and withdrawals are tax free, provided you meet certain conditions.) At a minimum, contribute enough to earn your employer's matching contribution, if one is offered, and try to boost your contributions whenever your salary goes up. If you don't have access to a 401(k), but you have earned income, you can contribute to an IRA. Even if you don't have earned income, but you have a spouse who does, you might be eligible to contribute to a spousal IRA.
  • Maximize Social Security benefits. You can start taking Social Security at 62, but your monthly checks will be much bigger if you can afford to wait until your full retirement age, which will be around 66½. If you are married, you may want to coordinate your benefits with those of your spouse — in some cases, it makes sense for the spouse with the lower benefits to claim first, based on their earnings record, and apply for spousal benefits later, when the spouse with higher benefits begins to collect.
  • Build an emergency fund. Try to build an emergency fund containing up to six months' worth of living expenses, with the money kept in a liquid account. Having this fund available will help protect you from having to dip into your retirement accounts for large, unexpected costs, such as a major home or car repair.

It's unfortunate, but women still must travel a more difficult road than men to reach retirement security. But making the right moves can help ease the journey.

 

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