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For many owners, business-continuity planning is comprised of creating a buy-sell agreement early in the company’s existence and filing it away. Unfortunately, on their own, buy-sell agreements are generally too simplistic to handle the complexities of exiting a business in style (i.e., selling the business when you want, for the amount you want, and to whom you want). Nonetheless, most business owners use buy-sell agreements as their sole business-continuity plan.
Weak continuity plans are like quicksand: Though they look like they provide reliable footing for a smooth exit, they often end up sinking the owner’s company when it is time to exit, whether voluntarily or involuntarily. As a business owner, how can youavoid falling into the false comfort of an inadequate continuity plan and assure that you can exit your business on your own terms?
The seven most common holes are as follows:1. Business-continuity plans overlook challenges to the business.2. Neglecting the decedent’s family.3. Buy-sells that are too simplistic.4. Ignoring common lifetime exits.5. Using cookie-cutter valuation formulas.6. Outdated buy-sells.7. Poorly implemented buy-sells.
Addressing and patching these holes will help you, your family, and your company adjustand adapt to both planned and unplanned exits, making it more likely for you to exit your business in style.