As I say on the cover of my ebook about Business Exit planning, “It’s Inevitable, One Day You Will Leave Your Business.” That stark and indisputable reality will face every one of us who own a business. We cannot prevent it; we cannot slow it down, it will happen. However, what we can do is not only prepare for that, we can also help ensure that our personal needs are taken care of and that whatever legacy we want our business to have is considered and prepared for.
So What Do We Do?
Let’s start with some basic truths that impact all of us:
- If our business is solely dependent on us for its work and revenue, then it most likely will not ever have value to a buyer.
- You cannot just wake up one day and decide to sell your business and complete that in a few days, weeks or months.
- None of us will live forever or be able to work forever.
When, as a business owner you accept those truths, you realize that you will have to do something about your future and the future of your business. Those are:
- You can close the business and go home.
- You can sell the business and do something else.
- You can keep the business, hire someone to run it and collect a profit check every month.
- You can pass it on to your children or other family members.
- Those are your only options. Anything else is simply stating one of those in a different way.
So Why Aren’t You Planning Your Inevitable Exit?
The consensus on the answer to that question revolves around emotion. To put it simply, we are hiding, ignoring or otherwise not recognizing what will happen regardless of our plans or desires. The professionals I know who are actively involved in helping business owners plan for their inevitable exit all agree on that. Sadly, we all face the same issue when a business owner finally does decide to exit their business; they want to do it as soon as possible, they are confused about why they can’t get as much for their business as they think they should (for those selling) and they are frustrated over successors and the difficulty in finding an appropriate one. None of us are mental health professionals so we cannot help them overcome their emotions. We also aren’t miracle workers and we cannot prepare your business for any kind of transition in 6-months; it is challenging enough to do that in 12-18-months. With 2 or more years of time to devote to the process we can help the business owner maximize the value of their business and, if they still wish to retain the business and be paid by the business, put them in a strong positive cash flow position that makes their retirement comfortable.
Why Should I Do This?
A well-designed exit plan enables owners to:
- Control the process and timing of their business exit,
- Achieve their personal financial goals,
- Maximize their company’s value,
- Facilitate their retirement,
- Explore all available options for their exit,
- Promote long-term growth and survival of their business, and
- Minimize taxes on the transfer or sale of the business.
Not having an exit plan typically results in:
- Not achieving the highest value for their business,
- Not being in control of the timing or strategy of the exit plan,
- Creating family fairness issues,
- Paying additional income and estate taxes,
- Not providing an atmosphere for the longevity of key employees, concerned about the control of the business in the future, and
- Creating uncertainty for all stakeholders
What Should I Do NOW?
Whether or not you choose to sell or stay, the steps you should take NOW are:
- Involve your Attorney, Banker, and Accountant.
- If you are not already working with one, find a Business Consultant to help you improve your business performance to its best possible level.
- If you are passing the business on to a family member, choose now. Given the emotional aspects of choosing among family members, your Business Consultant can help.
- If considering hiring a nonfamily member to operate your business work with your Consultant to develop a list of the necessary Knowledge, Skills, and Abilities this person must have to operate your business.
- Develop a formal training program for your family member or successor if needed.
- Establish a timetable for the handoff of your business to the family member or external hire.
- Work with your Attorney and Accountant to plan your retirement. Your financial advisor, if you have one, should be a part of this planning.
- Execute your plan.
If you have done all of the steps and afforded yourself enough time to plan it right, the execution of the plan could be as simple as handing over the keys to the business. Having a good well-prepared plan is critical to this final step.