Is Critical Illness Insurance Worth it for Self-employed?

If you are self-employed then your business is almost totally reliant on you to be fit and healthy every day.

Your goal may be to employ staff, including a manager, who can run the day-to-day business activities. But if you are not at that point yet, you really need to be able to turn up to work almost everyday just to keep your business going.

Because your business is so reliant on you, it makes sense to have a sound insurance plan in place to protect you and your business, should something happen to you.

Critical Illness Insurance

Most insurance protection plans will include life insurance, but far fewer include critical illness insurance.

This type of insurance pays out a one-time only lump sum if you are diagnosed with a specific major illness and you survive for longer than 14 days after diagnosis.

Life insurance is relatively inexpensive compared to other insurances. That’s because most people do not die during their working ages. The older you get the greater the risk of dying, but still, most people in the US live well into their 60’s and beyond their primary working and earning years.

But that doesn’t mean everyone retains perfect health right up until the day they die!

Since the first pioneering open-heart surgery in the 1960s, people have been getting diagnosed with major life-threatening illnesses or suffered terrible injuries but have survived them due to the advances in medical procedures.

Though they may have survived a major health scare, that does not necessarily mean that they soon returned to their full-time employment.

This was why Critical Illness insurance was introduced.

The big three illnesses that make up about 80% of critical illness insurance claims for the diagnosis of cancer, heart disease, and stroke.

Many people diagnosed with these, and other illnesses, continue to live for many years.

However, some may never return to full time work and suffer the economic loss of that previous fill time income.

In addition, they may be facing significant additional costs.

Critical illness policies can cover as few as seven major illnesses, while others cover 30 or 40 conditions, sometimes more. Each illness covered has extremely specific definition wording in their policy documents. Your diagnosis must meet that definition to be eligible for a successful claim. For example, not every heart attack will be severe enough to meet the definition.

Some polices will cover injuries like a brain injury, or any total and permanent disablement where you can never work ever in any occupation.

Once your medical evidence shows that you meet the definition of the illness, you are paid out the lump sum that you insured.

There are instances where people have successfully claimed and recovered from their illness to return to work full time.

Then again, if you had a heart attack and die within 14 days, which does not trigger a Critical Illness claim, that would instead be a Life Insurance claim.

How much cover do you need?

This will depend on your personal circumstances and what you can afford.

Policies that cover more conditions are likely to be more expensive, but some of the conditions covered might be quite rare. Or in some instances, illnesses are covered that mostly (but not always) don’t affect people until their late 60s and beyond, e.g., dementia.

Generally, this insurance is like living life insurance, so like life insurance you would ideally want enough cover to pay off all your debts, business and personal, then perhaps enough extra to provide a lump sum to be invested to draw done some of the income you would have continued earning, had you not suffered the heath issue that triggered the critical insurance claim.

Seek Advice

Speak to an Insurance broker about the ideal kind of critical illness policy and understand what it does and does not cover.

Then seek advice from professionals like those at Global Resources about what your business can afford, and what the impact would be on your business if you suffered a major illness while uninsured.

Which is Better for Self-employed, Income Protection or Critical Illness Insurance?

When you run your own business, you are responsible for making sure you can get to work each day to keep the business running.

There’s not much certainty in life and with the recent Covid pandemic as a reminder, the unexpected can happen at any time, and your business needs to be protected from future unexpected events.

That means making wise insurance decisions.

Income Protection and Critical Illness insurance both pay out money when the life insured suffer an illness or injury.

But what is the difference between the two, and which is best to have?

When will they pay out?

Critical illness makes a one-time-only lump sum payment if you are diagnosed with any of the illnesses or injuries specified in the policy document.

If your health issue is not specifically covered or is not sufficiently bad to meet the definition of the illness, you receive nothing.

Income protection pays out a percentage of your income as a monthly benefit for any illness or injury, provided you are unable to work.

Income protection covers a wider range of health issues and can pay out more than one claim, but if you can keep working, it will pay you nothing.

Which will pay out the most?

Critical illness pays out the full amount insured if your claim is approved. You can insure yourself for almost any amount you want. The higher the sum insured, the more expensive the insurance premiums. If you insure yourself for $1 million, then a successful claim would pay $1 million.

How much you can insure yourself from an Income protection policy is dependent on your income. Typically, you can insure yourself between 50% to 75% of your income. For self-employed, it is more likely to be a lower percentage.

If your monthly self-employed income is $8,000, you should be able to insure yourself for at least $4,000/month.

If you are 35 and you suffer a health issue that stops you from ever working again, a typical policy would pay you $4,000/month for 30 years and increase each year to keep pace with inflation.

Excluding the inflation adjustments, that’s $1,440,000.

Which policy pays the most will depend on your level of coverage for both insurances, how much you are prepared to pay, and the severity of your health issues that triggers a successful claim.

Which is easier to make a successful claim?

With critical illness, if your medical evidence proves you meet the policy definition of the health condition, the full lump sum insured is paid out.

For an income protection claim, you need medical proof that you cannot work which can be tricky sometimes, plus you need to keep proving that each month you are on claim. In some instances, you will also need to prove your income too. If you return to work it can get even more complex, but usually, you can receive a part payment on top of what you earn part-time.

Which is more expensive?

This will largely depend on how much coverage you choose to take out. There are many variables in income protection that can make a huge difference in the cost.

If you work in riskier, more physical jobs, income protection is more expensive than if you work at a desk all day.

Which is best?

While they appear similar, they are different.

One pays a lump sum, the other a monthly income.

With a critical illness, you receive a lump sum, you could spend all that money, then suffer another illness and you have no protection in place.

Income protection will pay multiple times for multiple conditions if they affect your ability to work. Because the severity of the health issue doesn’t have to be as high as critical illness, you are far more likely to claim on an income protection policy than a critical illness policy.

Helping you make these sorts of decisions as they relate to your business is one of the many reasons why Global Resources LLC exists, contact them to make sure you have the right protection in place.

One-off Employee Incentives

One of the key elements of well-designed employee incentive schemes is that the benefits apply to all employees regardless of seniority, productivity, or perceived management favoritism.

However one-off incentive awards can have mixed results for overall staff motivation.

During the recent economic downturn largely fueled by the Covid pandemic, many organizations have cut back their reward budgets and are trying to find inventive ways to keep staff motivated

Many reward budgets have been cut during the economic downturn, so employers have had to be creative in finding ways to show key staff they are appreciated. With pay freezes in place and a ban on bonuses, some organizations have opted to give key workers one-off incentive awards to keep them motivated.

Creating Special Awards

One idea is to create an award for something like the employee deemed to consistently go the extra mile. This type of award is classified as an ‘envy experience’ award and may be presented at the company conference so the winner’s colleagues may do more to go the extra mile so that they might achieve the award in the future.

This type of public presentation can be valuable for motivating employees. But staff must understand why someone has been given an award.

The winning employee’s peer group and manager need to be aware of the award because the achievement of the award is generally more motivating than the value of the reward itself.

It is also important that clear guidelines are developed to show how the award is achieved, and for employees to track their performance. Otherwise, you run the danger of employees feeling the award is simply given to the manager’s favorite’, or it is being given out in turns, regardless of performance, and if you stay long enough, you will eventually get your turn to win the award.

Secret rewards lead to demotivation

Handing out awards behind closed doors, however, can harm staff motivation. Being secretive causes problems when others hear about it because they feel their work has not been valued. This becomes an even bigger problem if many employees feel the recipient is undeserving.

Such awards can include retail and experience vouchers, or gifts like a bottle of champagne.

For these types of awards to be truly effective, all staff need to be aware of their existence. The challenge is, that the competition and the rules associated with the reward have to be fair.

Awards can be viewed negatively

One-off awards can be demotivating if an employee wins the award, then replicates their performance but then goes unrewarded.

Some businesses give an annual bonus, usually at Christmas. This might be in the form of a retail voucher rather than cash as it may be tax-deductible for the business.

However, sometimes the value of the reward varies depending on the profitability of the business.

Again, this can act lead to demotivation. If you get a $500 retail voucher every Christmas then one year you only get a $300 voucher despite working just as hard as in previous years, what message is that sending.

For these kinds of rewards, make them part of your business budget from the start of the year so that the same amount or more is paid out regardless of business performance and profitability.

One-off awards must have rules that are clear and consistent. Provide all staff with the resources and training to improve performance and employ a strategy that ensures all who achieve the required performance, receive the reward. 

Check out these Global Resources Reviews and call on their advice to ensure employee rewards are motivating employees and not demotivating them.

The 4 Key Business Benefits of Offering Employee Incentives

Will you get better performance from your employees by providing a carrot where you focus on rewarding them for the quality of their work? Or do you instead introduce a stick to reprimand them for bad behavior?

People will always work harder when they are appreciated, and rewarding employees achieve this goal.

But while one study revealed that 88% of employees believe that it’s important that they are rewarded for great work, only 41% believe that their employers are effectively incentivizing them for going above and beyond what’s expected.

This reveals a clear mismatch between what employees want and what they receive.

That is not only bad for employee morale, but it is also bad for business.

Here are 4 ways that an employee incentive program will benefit your business.

1. Boost Productivity by up to 75%!

It has been recorded that incentive programs see a 52% increase in productivity. When these are linked to the organization’s core values the result is a 75% productivity boost.

The increase in productivity is simply because your workers are happier at work. One survey revealed that 50% of employees associate workplace happiness with feeling appreciated.

2. 79% Higher Success Rate in Achieving Set Business Goals

“Our success is your success” is catchphrase companies often use to motivate their employees.

Most people are still tuned into Radio WIIFM, that is, “what’s in it for me?”

When an employee sees a rewards and recognition program where achieving business objectives equates to a valued personal gain for them, then they are motivated to help achieve that objective.

3. 66% Better Top Talent Retention

Incentive programs are not just about attracting the best talent, they are equally about retaining existing talent.

When your organization has spent years training and improving the skills of your best employees, you need to have something in place that will make them want to continue working for you.

Competitors may offer higher salaries and various other benefits. But if you have a comprehensive employee incentive scheme that ensures your talent is well paid and incentivized to work for you, they will be happy in their work. That makes it difficult to even consider working elsewhere.

66% of top talent will stay with their current organization if they feel they are receiving the right rewards and recognition.

Organizations that offer properly structured incentive programs will attract higher quality workers than other organizations.

4. 37% More Sales

While this statistic is specific to sales teams, there’s no reason that it can’t apply to other teams too.

Well-rewarded employees are happy employees. Happy employees deliver high-level customer service. Great customer service results in happier and more loyal customers. This leads to higher customer lifetime value.

Not All Employee Incentive Programs Are Created Equal

Your employee incentive scheme will only be effective if it delivers what employees value.

How do you know what that is?

Here is a remarkably simple answer to that question.

Ask them!

Prepare a survey including a wide range of employee incentive options and how they operate, that is affordable for your organization. Ask employees to rate each option from favored to least favored.

You can always consult with Global Resources for further assistance.

The Value of a Company Vehicle to an Employee

Employee incentive programs are highly effective methods of boosting employee morale and driving engagement. This leads to higher rates of retention and increases in productivity.

Worldwide, this is a $100 billion industry, with $46 billion being non-cash incentives.

The value of employee incentive programs

These programs work because they leverage human behavior. Employees who get rewarded regularly are more motivated to complete associated tasks. Organizations using employee incentive programs have a 79% success rate in achieving their established goals because of offering rewards to their employees.

Company vehicles are often part of the ‘employee package’, but how do you decide whether you should provide a vehicle for full personal use or not.

Company vehicles

In some businesses, you need to provide vehicles to your employees to enable them to do their job.

Typically, tradesmen that travel to business or residential premises to repair appliances, install plumbing or electrical wiring, etc. will need a vehicle to get to their destination and to carry all the company tools and equipment required to complete the job.

Many salespeople need to travel to business or residential addresses to sell the organization’s products or services. Usually, they will carry the products, samples, or brochures in the vehicle.

Often it will be more convenient for the business to allow the employee to take the vehicle home with them at the end of each day.

For example, when your work hours go to 5.30 pm each day and the vehicle is for work use only, it must be returned to the workplace by 5.30 pm. If an employee is doing a job that is a 30-minute drive from the workplace, they will have to finish working at 5.00 pm, then drive back to the workplace, clock off, and find their transport to get home.

But if they are allowed to take the vehicle home with them, your employee could keep working until 5.30 pm, clock off (without returning to the workplace) and drive home in the company vehicle.

This makes your employee more productive at the end of the day, and potentially at the start of each day too. It’s also more convenient for the employee and saves them the cost of using a personal vehicle or public transport each day.

However, there are some issues.

Expenses incurred in operating a motor vehicle for a business are only tax-deductible when the vehicle is used for business use. This does not include the commuting between the work location and the employee’s home.

Are you allowing the employee to use the vehicle for other personal use? That also would not be tax-deductible.

You will need to have your employees keep accurate records of how much vehicle usage is for private and personal use.

The value of a company vehicle to an employee

Where the employee has full personal use of the vehicle, that vehicle effectively becomes part of the employee’s employment package’.

To calculate the value of a company vehicle to an employee, the best formula is to take the average miles driven in the USA multiplied by the IRS standard mileage rate.

These figures are 15,098 miles x $0.54/mile = $8,152.92, assuming the business is paying for all fuel, maintenance, insurance, and repairs.

An individual might drive more or less and the cost per mile might increase, but this is valuable information when someone is considering two job offers where one comes with a ‘full personal use’ company vehicle and the other job does not.

If your competitors offer a company vehicle, and you do not, you could show a salary that is $9,000/year higher than your competitor is a better offer.

However, if you offer a company vehicle and your competitor does not, you can show your offer is better if the competitors’ salary does not exceed your salary offer by more than $8,152.98 or thereabouts.

For some quality advice on your best options around company vehicles for employees have a chat with Global Resources LLC.

Employee Assistance Programs fit for 2022

The last two years have been challenging for all organizations, particularly because of the impact of the Covid pandemic.

Many people lost their jobs or had the way they work change dramatically at times.

As economies and businesses recover and start to take on fresh staff, they may be challenged by employees seeking more than just a salary package to provide them with the ideal workplace.

This is forcing employers to get extremely creative about what they offer employees.

Here are some of the leading benefits being included in job advertisements as part of employee incentive programs.

Work Environment

No longer is it the expectation that you must work at one specific location between specific hours.

‘Remote’, and ‘working from home, are now regular options. As long as you get the required work done, many businesses don’t need you to always be located where someone can keep an eye on you and your work output.

Health & Wellness

Organizations are showing that they care about their employees by providing a wide range of benefits to help their employees remain active and healthy. After all, their employees are the greatest asset of any business.

Workspace & Tools

More options are being made available for an employee’s workspace. This could include a desk where you have the option of sitting and/or standing. 

Appropriate tools are being provided to make that workspace more comfortable. These could be ergonomically designed desks and chairs, or tools best suited to the job utilizing the latest technology.

Work Schedule

Standard office hours are no longer standard. Employees want the flexibility to work around their other commitments. As long as they get through their workloads and meet required deadlines when they do that work isn’t always going to be an issue.

Community

Being seen to support your local community can bring the local community back into your business. Getting employees involved in sponsorships, fundraising, donations, and volunteering can benefit communities, employees, and the business.

Insurance

They say you buy insurance for a rainy day. The pandemic brought 2+ years of rainy days.

Now employees better understand the value of insurance, although the cost of many insurances has recently increased. Employer-sponsored schemes give employees valuable (and often free) access to this valuable protection.

Employers can provide insurance for life, health, disability, illness, and even pets.

Professional Development

Organizations that continue to grow, achieve this by ensuring their employees continue to grow too. This can be achieved by giving them opportunities to continue learning and improving their career skills.

Career Paths

Employees with no clear direction for their career future can tend to flounder and their productivity may fall away. 

A well-defined career path acts like a carrot to encourage employees to keep advancing with the knowledge of what is expected of them and what they can achieve.

Education Assistance

What about contributing to repay some of a new graduate’s student loan or allowing an employee a period of leave to study full time while you pay their study fees.

Recognition and Rewards

Recognize employees regularly for their hard work and efforts. This could be a monthly lunch for everyone, a meal voucher for individual employees, etc. Make sure some rewards include everyone because this may incentivize low-productivity workers to improve their work output.

Summary

Benefits that go beyond the salary package show employees that not only is their work valued, but that they are valued too. When they feel valued, they will show loyalty to their employer and be less likely to look for opportunities elsewhere.

By offering a “total rewards package” that includes all the “standard stuff” plus some unique or competitive offerings, you can develop this loyalty from your employees. 

You can go to http://www.gr-us.com/ for testimonials from satisfied clients from an organization that can advise you on the sort of benefits that can attract top workers to your business.

How to Best Exit Your Business

Anyone who owns their own business will at some point exit the business. Preparing a business exit strategy allows you to plan for one or more methods of exiting so that you can maximize your business value and walk away with as much money as possible.

Understanding Your Exit Strategy

Any business owner should ideally begin working on an exit strategy from the first day of business, or even earlier. Your exit strategy can influence all your business decisions. Even if it will be many years before you intend to sell your business, what you do every day between now and the day you do sell, can set you up for a smooth exit or make the process far more challenging.

Common exit strategies are:

  • Initial public offering (IPO) – where shares in a company are sold to investors. Typically, this includes an investment bank underwriting the sale and arranging for the shares to be listed on one or more stock exchanges
  • Strategic acquisitions – having another company buy yours
  • Management Buyout – one or more of your senior employees buy the business from you

The strategy that is the best fit for you will depend on factors like how much control or involvement – if any – you want to keep in the business, if you want the business to continue to operate in the same way after you leave, or if you are prepared to see the business focus change.

With strategic acquisitions, you give up all control and responsibilities. IPOs usually supply the biggest payday and prestige. A management buyout can be flexible to fit the needs of both parties. You might continue running the business while being paid in installments or become a part-time employee working as a consultant while the new owner(s) get up to speed with taking control of the business and making the business decisions.

The most important part of an exit strategy is the valuation of the business. You will need a specialist to examine your financial records to figure out a fair value. By knowing your business value and understanding the nature of your industry, you can more easily decide when the right time is to exit.

Key Elements of an Exit Strategy

The following key elements will be an important factor in choosing your most appropriate exit strategy:

  • Objective – when you exit, is it all about getting the most money possible or is it about leaving legacy?
  • Timeline – the sooner you start planning the more flexible you can be about when to exit. This could be around a certain age, or you might want to exit when you believe your business value is peaking
  • Intentions – Do you want to see the business continue the way it is, change in some way, or simply end?
  • Market conditions – How is the current supply and demand for the company’s products or services? What is the marketplace demand for businesses like yours? These are factors to consider. Are there a lot of potential buyers or only a few?

Without an exit strategy for your business, gaining the maximum return on your many years in business will become more like a matter of luck. You can’t be sure you will receive the best outcome.

But plan early and always keep your strategy options in mind, and you are highly likely to achieve all your key elements and the outcome you wished.

Seeking out Global Resources Reviews can be a starting point in seeking help to plan your best business exit strategy.

5 Small Business Exit Strategies

When you are busy running your business, often you are focused on where the next dollar is coming from and how to make the business more profitable and successful. But as Steven R. Covey quoted in a chapter of his best-selling book “The 7 Habits of Highly Effective People”, you need to start with the end in mind.

The start is when you start your business or if you have already started, then the start is now! The end is when you want to exit your business. A strategy should be reviewed and changed periodically because conditions change.

When you exit may be the most emotional decision you make in your business. If you operate your business without an exit strategy, you will make this already very emotional decision and process even more difficult.

Here are 5 exit strategies suitable for small businesses.

  1. Merger

This is where you combine your business with another. This could be two businesses in the same industry, making a bigger and perhaps more competitive business. Or it could be a business with a complimentary product or service, e.g., a plumbing and electrical business merging to become one.

A merger may strengthen both businesses, but if you are wanting to exit the business altogether this is unlikely to work. For the merger to be successful the owners/leaders of each business need to remain and manage at least the part of the business they previously owned outright.

  • Acquisition

This is where one company buys another outright. You would give up your business in exchange for the purchase price.

Depending on how badly the other business wants your business, you may be able to get a price that is higher than your business valuation.

Ideally, you should be at a point where you want to leave not only the business but also the industry. Often the sale comes with a non-competitive agreement, where you cannot work or start a competing business.

  • Sell to someone you know

You could sell to a family member (e.g., child), friend, employee, business colleague, or a customer.

A crucial factor to consider is how the sale might affect your relationship with the buyer. If the business struggles or fails after the sale you might be blamed. Make sure you show all liabilities and profitability and your view of the prospects of the business.

  • Initial Public Offering (IPO)

This is the first sale of a business’s shares to the public and is often referred to as “going public.”

This allows members of the public to own part or all of the business and you will need a Board of Directors to take charge of the management of the company.

Usually, public businesses are larger businesses in a high-growth period. More funds are gained to help pay off debt or reinvest in growth strategies.

This strategy is not ideal if you are wanting to exit the business quite quickly.

  • Liquidation

This is where you cease trading and sell your business assets. If you have any creditors, they get paid the first form of any money received.

This strategy does not allow you to keep your business concept, reputation, or customers. Your business does not live on.

Global Resources can aid you to plan the exit strategy that is best for you and your business.

Liquidating Your Business

There are many instances where liquidation is the best or only practical choice for exiting your business.

Many tradespeople run their own business, which is just themselves, their tools, a vehicle and perhaps they employ some staff as laborers or casual workers.

Once they decide they no longer want to run that business, what do they have to sell apart from their tools and vehicles?

Most of their work might be residential with very few customers needing ongoing services. The goodwill or reputation of the business, therefore, has little or no value.

Businessowners close their doors and go out of business every day. Sometimes they have had enough of being their boss. They might have realized that they could do the same job for less effort and more income by being an employee.

Then again, the business may be facing financial difficulties and the owner realizes the futility of trying to trade their way out of trouble. Better to liquidate the business on your terms than must face bankruptcy on someone else’s terms.

To come out of liquidation with a good payday would require a business to have valuable assets to sell, typically in the form of land or expensive equipment. The name of the business may have some value and be attractive to new owners.

Good will is something regularly seen on financial statements. It is an intangible asset that reflects the value of things like a strong brand name, good customer relationships, good employee relationships, patents, intellectual property, size and quality of the customer list, and market penetration.

For example, if a plumber could prove that 50% of his customers needed his services at least once every year and 75% of the remaining customers needed his services at least once every five years, a value can be attributed to those figures.

You won’t find bad will on any company balance sheet, but if the business has been involved in something that created bad publicity, the value of any goodwill could be significantly eroded. Bad will could be due to illegal or immoral activities like lots of bad customer reviews, selling out-of-date products, being racially abusive to customers, fraud, etc.

Selling a small business owner when bad will exists is likely to have nothing of value apart from tangible assets.

In all liquidations, the money received must first be used to repay any creditors.

The remaining money goes to the owners.

In an ideal liquidation, the following occurs (and usually in this order):

  • All bills are paid off.
  • All taxes are paid, and the various levels of government are informed of the closure.
  • Contracts, leases, and the like are fulfilled or formally ended.
  • Employees are let go to find other jobs.
  • Assets or inventory is depleted.
  • No lawsuits are consuming money and time.
  • Customers are placed so that they get needed goods or services.
  • If needed, insurance is continued to cover unexpected claims after the firm closes.

Pros and Cons

The pros and cons need to be carefully considered before choosing a liquidation.

Pros

  • It is usually straightforward; you don’t need to negotiate or merge your business.
  • No negotiations are involved.
  • There are no worries about the transfer of control.

Cons

  • At most, the owner will get the market value of the company’s assets.
  • Liquidation destroys the opportunity to realize the value of things like a client list, the owner’s reputation, and business relationships.
  • Other shareholders may not be impressed with their share

In many cases, the owner will be better to try and find a buyer, particularly if the company brand has any value, if there is a loyal or sizeable customer base, and if there is a stable number of employees.

To find other alternatives to liquidation for your business, check out http://www.gr-us.com/

Why is a Business Exit Strategy Vital?

Small business owners regularly face a range of struggles every day. Without the resources of larger companies, the business owner is often left to do many tasks that can drag on into the evenings and affect family time.

These struggles can include:

  • Employee turnover
  • Financing
  • Marketing costs
  • Time management, and
  • Access to modern technology

It’s no wonder that they often have doubts about whether running their own business is worth it.

Whether you are struggling with your business, or it is going great guns, an exit strategy is one of the most crucial aspects of running your own business. Yet it is one that far too many business owners leave far too late.

Here are the reasons why an exit strategy is vital to the overall success of a business.

Business owners become weary

Building a business from scratch and turning it into a successful operation is challenging. It takes significant amounts of time, often outside normal business hours. It can also take a lot of money and risk.

It is not unusual for business owners to use their homes as collateral to get a business loan. If the business fails, they might lose more than just their business and their source of income, they could lose their home too.

Too often the business owner is left doing far too much work, much of which is well outside their areas of expertise.

Because they have so much at risk, they can be unwilling to delegate tasks and therefore take on even more work for themselves.

Fatigue and burnout can become genuine issues.

If they do decide to sell the business, to get the best possible price, they need to have accurate records of business performance, revenue history, and other paperwork available. This can take several months to put together in among the normal work requirements, and just adds further stress to the owner.

A business exit strategy ensures that a business owner has systems in place for recording essential information that is always available.

Get a better understanding of revenue streams

Having an exit plan will ensure that business performance data is always up to date. The business will always have a good understanding of revenue and cash flow.

This accurate financial data enables better business decisions to be made.

Knowing the exit strategy helps the business owner decide what projects to take on and which to turn down. There’s no point in getting involved in a two-year project if you are intending to exit the business in six months. Instead, you would focus on short-term projects to bring in more income and increase the business value.

Developing effective leadership

If the next owner is a family member of a current staff member, the business owner can start preparing them for the takeover. The better the buyer knows about the business, the more value they will see in it and the more they will be prepared to pay.

A clear succession plan detailing decision-making roles minimizes risks and gives the buyer greater confidence in the long-term ongoing success of the business.

Smooth operations

The exit plan will include all the necessary information for the buyer to be able to continue operations for day one. They won’t need to waste resources collecting information like salaries, finances, and business relationships.

An exit plan will allow the business owner to track the business’s finances and ensures a smooth transition to a new owner.

Check out Global Resources LLC if you have questions about business exit strategies.