Planning Ahead - #1 - An Exit Strategy
As any baby boomer in business knows, it is smart to think about what to do with your business “at the end.” What will you do when the day comes when you can’t manage your business any more? Now, I know lots of business owners running successful businesses into their 70s, 80s, even 90s. But it is a good idea to plan ahead.
Here are some thoughts from New Hampshire Business Review :
The purpose of “exit planning” is to maximize the value of your business when you leave, whether you leave it to family, or sell. Think of it this way: Your business has lots of value while you’re running it, but if you stop doing what you’re doing, you don’t want your family to be left with a useless business that has no value to them and which they can’t sell for a decent price or turn over to someone else to run. You also have a valuable retirement asset in that business. Walking away from it is a sure way to lose that value.
One consideration: What are you doing to “clone” yourself? Who could step in if you were disabled or sick for an extended period of time? What plans could you make for a smooth transition for someone else?
Sit down now and start thinking about this. Seriously.
Tags: baby boomer, business, exit strategy, retirementRelated Stories
POSTED IN: Boomers nearing retirement, Business Plan, Health, Sharpening The Saw
5 opinions for Planning Ahead - #1 - An Exit Strategy
John Chang
Feb 5, 2008 at 1:12 pm
If you know about supertankers, you know that these huge ships that take miles to change direction.
So, 5-10 miles out the captain needs to make minor course corrections. A matter of a few degrees makes the difference between safely docking, or driving into the pier.
Well, this is what can happen to business owners.
If they don’t get their financials in order - day to day the mess in the shoebox gets even more out of hand.
If they cut corners on their tax returns, little do they know that buyers care only what is reported income - not “hidden cash.”
If they’re structured to put more money in their pocket, it’s too late to put a 10-year plan in place when they want to sell in 6 months to a year..
–
John Y. Chang, MBA
Business Broker
Daniel Winkler & Associates
1302 Solano Ave
Albany CA 94706
510-550-7255
If you’re a Baby Boomer who owns one of the “12 million privately owned businesses, of which more than 70% are expected to change hands in the next 10-15 years..” - Robert Avery of Cornell University, February 2006 ..what’s your exit strategy?
http://www.johnchang.info/exitstrategy/
Michael Growan
Feb 7, 2008 at 9:45 pm
You need to be thinking about this as early as possible, so that you can rapidly get to the point where your business continues to operate without your presence. Michael Gerber’ ‘e-Myth’ books cover the principles involved, and James Brausch’s ‘Freedom Business System’ course shows you how to create procedures to outsource practically any task. But start doing it today.
Jean
Feb 8, 2008 at 2:10 pm
Thanks for both of your comments. I have read the E-Myth and try to follow it. Now I will go find more on James Brausch.
Allan Himmelstein
Feb 9, 2008 at 6:36 pm
I am not a Business Broker. However, I agree that Planning ahead is critical. What is difficult is really understanding what the worth of your company will be. One of my 60 year old clients was approached by a Business Broker and was told that there would be no problem in selling the business. I totally disagree. It is a very profitable stable 20 year old business and all the are financials in great shape. The owner only works 3 days a week and takes 4-6 week vacations. Besides the owner there are 5 independant contractors. The owner is the Rainmaker. Who is she going to sell it too, and what is needed to secure the independant contractors to stay with the company? On the surface it seems to be an easy sale. This does need planning. Her Advisory Board and I have been helping her with the Exit strategy.
John Chang
Feb 11, 2008 at 10:15 am
I agree with Allan, which is why I’ve been shifting my practice to a more consultative approach.
It’s a bit like medicine - too many times “conventional” Western approaches address symptoms. (e.g. Got a headache? Take an aspirin) ..instead of dealing with root causes. (Maybe the real problem is something as simple as dehydration.)
Taking Allan’s example again, it’s clear that the business broker in question doesn’t identify the issue of the owner being the Key Player. (or at least doesn’t seem to recognize this)
Because the standard way that he / she makes money is from commissions off the sale of businesses, there’s less incentive to think long-term.
That’s why we’ve started to take consulting fees upfront and discount off the commission on the back end, if a sale is imminent (within 2 years).
We provide valuable service to the client NOW, and there’s incentive for both of us to work together in the future.
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