ARTICLES & REVIEWS
Business Exit Planning
London Free Press
A business exit strategy requires careful planning – now.
Every day you drive by that golf course and think, “I’ve built my own company, and I’m not getting any younger. Maybe it’s time I got out of this business, and started to book tee times instead of sales meetings.” Then you’re in the office and the day is underway.
And the days turn into weeks. The weeks become years. And still no tee times.
Building a strategy to leave the business you’ve spent a lifetime building may seem like a difficult task best ignored.
But ensuring a smooth departure from the businesses they’ve worked hard to build is certainly on the minds of Canadian business owners. Research identified the top exit strategy concerns of Canadian business owners and managers:
- Having enough money for retirement 88%
- Ensuring a good transition 78%
- Identifying a suitable successor 72%
- Finding the time to develop a plan 59%
- Giving up control 43%
Building a good strategy helps alleviate these concerns. It’s good for you, it’s good for business and it’s good for the future.
Good for you. Good for your business.
A good plan helps you:
- Protect the full value of your investment.
- Generate an income stream for retirement.
- Create a smooth management transition with minimal business disruption.
A good plan helps motivate key employees or family members to prepare for new roles. It helps the company recruit and retain better people and encourages new ideas to improve internal processes and maximize opportunities.
It can also help pave the way for future growth by asking such questions as, what is the future direction of the business? What products or services will we sell in 10 years? 20 years? How will our markets change in that time? What types of people and resources will we need to be competitive?
A good exit strategy is something that needs careful consideration, and the sooner, the better. Here are three questions to help you get the discussion started.
- When should I sell my business?
From an economic standpoint, the best time to sell your business is at the point at which the sale yields financial independence. That means having enough principal invested to generate an annual cash flow that supports the life you want to live, without having to draw on the principal.
If your goal is personal wealth, but the sale of the business doesn’t yet meet your lifestyle needs, you have three options. You can grow the business through acquisitions or consider selling it and reinvesting in another company that will better help you achieve your financial goals. If none of these strategies are available to you, the third option is to consider reducing the cost your lifestyle.
- Why should I sell my business?
Besides the personal and financial incentives that inspired you to become an entrepreneur, there is also great creative expression in what you do. In fact, personal wealth is probably secondary to the pure enjoyment you derive from what you do. And when you’re no longer motivated by the work, it’s probably time to sell.
These entrepreneurs are smart enough to realize the best time to sell is when they are still young enough to enjoy the fruits of their labours.
Time is your most important asset.
The most important question you should ask is a purely personal one: “What am I going to do with my time?”
The inability to resolve this issue is the underlying reason why most business owners never get around to exit planning. They are naturally wary of selling their business. For years they’ve been building and nurturing their companies. Their self-image is defined as an owner and rarely is a decision made without considering consequences to the business.
You may be surprised to learn that golf, tennis or travel won’t fill every minute once you’ve left your business. Soon, you’ll be looking for new outlets for your creativity. That’s the time to put your energies into family, a favorite charity or community work. After all, you have the proven talent. Let others benefit from your skills.
Don’t make the mistake of putting off your business exit strategy until you feel you’re too old to leave. Use these three questions we’ve developed to help start your planning today. It’s a process that requires honesty, hard work and critical assessment. But it’s one that will pay off for you, your business and the community where you live and work.
