We are small business owners from the Baby Boomer Generation. We aren’t as young as we used to be. The oldest among us is about 71, the youngest is about 51. We’ve worked hard running our businesses while raising a family, accumulating things and if we were successful, making money.
So now what?
Now some face retirement or moving on with new adventures. What do we do with our businesses? We have several choices:
- We can close the business and go home
- We can sell the business and do something else
- We can keep the business, hire someone to run it and collect a profit check every month
- Pass it on to our children.
Each of these options has positives and negatives. Some of us have businesses that simply won’t sell. In that case, closing might be our only option. However, that isn’t a good option if we can sell it or hire someone to run it while we enjoy the profit from it. Remember that for many small business owners their business is a means to enjoyable life after work. It should provide them with the income and the security that comes from that income for all of the things they want to do.
Obviously selling the business puts some money in our pocket. But understanding that the cash you receive for your business may well be reduced because of liabilities, taxes, etc, could put a damper on that idea.
Hiring someone to run your business is another great idea because it gives you cash flow. It is dependent upon your business being profitable enough for you to pay someone to run it AND pay you profit that is enough to meet your needs.
Pass it on to your children which could still involve the issue of making enough profit to meet your needs.
Ideally, you started planning for this the very day you started your business. Unfortunately, if you are like most you didn’t do that. So now, as you face that natural life and business transition we all will face, you have to do something about it. Now is the time to begin improving your business to make it efficient, great and most importantly profitable. Profitable enough to meet your needs regardless of which option above you choose.
Last week I wrote, “When Good Enough Isn’t Good Enough”. That article listed 8 key points of a business and emphasized their importance to success. Those same 8 points MUST be used when you prepare your business for your eventual departure from it.
When I work with business owners who are considering the above we used a budgetary approach that coupled with education, tools, training and coaching drives performance and improves revenue, profit, and net business value. These three areas working together ensure that regardless of the scenario above, less of course simply closing your doors, the maximum amount of cash is delivered to the business owner.
The approach involves changing and improving the 8 business processes so that they meet the following criteria:
- They each are performing at an appropriate level to the business giving financial balance through increases in revenue and decreases or stabilization in costs.
- Each process is appropriately designed, measured and managed in order to maximize its contribution consistent with a balanced business model.
- The business owner and any employees involved in these 8 processes are appropriately trained and given the necessary tools to drive the business goals.
This is not a process that is done in a couple of months. Ideally, you want to start as early as possible in the business. This affords you the luxury of time to make the business as productive and profitable as possible. While significant results can be achieved by a business owner using this method in less than a year, most businesses will take several years to reach an optimal level of performance that allows the owner the best outcomes for their transition out of the business.
Also, it is not uncommon for children of current business owners to decide they want to continue the business. While this is a dream of many owners, reality may well be that the children lack the business knowledge to successfully do this. A long term well-executed plan allows for the education and training of the next generation and ensures a sustainable future for the business. This too takes time.
Making a decision to transition out of your business should not be a spur of the moment thing. Planning, and executing the things it takes to ensure that your years of dedication to your business will provide you with the income you need to enjoy those years when you choose to no longer work; or to provide you the means to start a new endeavor.