“What you need to understand is that every day, you make decisions that impact your exit.”
Christopher M. Snider, CEO, Exit Planning Institute
A few weeks ago, a business owner I’ve known for well over ten years told me that he and his team were completely focused on expanding the company; all time and financial resources were devoted to that goal; and he could not be distracted by spending time on an exit strategy.
Just the other day, I met a business owner at a networking event. Despite my points about building value, she locked in on the word “exit.” Her follow-up email promised that if she called anybody for help it would be me. However, the main thrust of your message was: “I’m not ready to sell my business yet. I have several things to accomplish before I even start thinking about it….”
Sometimes I wish the Certified Exit Planning Advisor (CEPA) designation didn’t include the word “exit.” First, Baby Boomers hear the word exit, and they immediately think about growing old, becoming irrelevant, and sitting in a retirement home. Second, business owners tend to think Exit Planning is something they can put off until later while they concentrate on growth.
By “growth” they usually mean increasing sales revenue and producing more income. They are concentrating on more short-term gains.
The essence of Exit Planning is doing things better by making the business less risky, finding efficiencies, and improving growth potential. Those are the things that will increase the market value of your company.
If you concentrate on Better, more will come. The opposite is not usually true. (Read: Better vs More).
Here are four key points from the book Walking to Destiny by Chris Snider:
- Paradigm shift is required. Exit Planning is simply good business strategy integrated with you personal and financial goals and objectives.
- Business is personal. Personal financial goals and personal aspirations should be driving the business, not the other way around. There will be times when you have conflicting value systems. Owning a business is personal.
- Value is the primary long-term goal – not income. This sounds like a subtle play on words, but in reality, this is a significant paradigm shift.
- Focus on the present, not he future. Much of what has been written about exit planning focuses on the endgame. But is isn’t accomplished by focusing too far down the road. Your successful exit is based on what you do now; every day counts. There is no reason you can’t benefit today and in the future. You can do both.
In his series on building a sellable business, Justin Goodbread, who is a CEPA, certified financial planner, and serial entrepreneur, wrote: “In order to reap the capital rewards from the seeds of value we’ve sown, we should actively create the business owner’s exit plan just like we mapped out our original business plan.” In fact, he strongly suggests that the whole point of having a business plan is to build a sellable business and that you have to begin with the end in mind.Check your company’s marketability
“You can’t begin a business if you don’t know how it’s going to end. You have to identify why you are working before you can figure out how to work wisely. You must recognize intrinsic value within your business and then work to increase, or accelerate that value purposefully and strategically. And one of the best ways to start that process is by building a plan… a business plan.” As a business owner, you follow the plan by taking daily actions that result in building value into your business. The destination you are keeping in mind is converting that value into financial independence and a legacy for future generations.
Get more information about the value of your business. (Read: V is for Value).
The company you built is your greatest financial asset. Shouldn’t you take action to eventually convert that asset from potential to actual wealth to 1) fund the “third act” of your life so your kids won’t have to (don’t count of Social Security) and 2) secure your legacy?
It won’t be as easy as you might think.
The sad truth is that only 20% of small and midsize businesses that go to market actually sell, even in good times. That’s because most of these companies are not ready to withstand the scrutiny of the selling process. They are not ready because the owners did not build an exit strategy into the daily running of their business. They didn’t think about being in competition against many other business owners, and how that competition would make it even more difficult to become part of that successful 20%.
Even if you decide to transition the business to family, you will still have to fund your retirement and ensure that the business will flourish under the next generation’s leadership.
There is a way to beat the odds, fund a comfortable retirement, and establish a lasting legacy. The first step is to get the right information. See the schedule for Go Beyond’s for one of our educational programs for business owners.