“The nicest thing about not planning is that failure comes as a complete surprise, rather than being preceded by a period of worry and depression.” - Sir John Henry James
I have been using this quote in my Business Owner Briefings for over 15 years now, as it accurately describes many of the business owners that I have met over the course of those many years. In my opinion, this ancillary benefit of not planning should give business owners little, if any, solace.
Every business owner will in fact leave their business, “one way or another”. The question they all need to ask themselves is, “when that time comes, will it be an utter mess, or will it be in a way that I would want it to happen?” I think most owners intellectually understand that planning for their ultimate departure makes sense, but until they move that understanding from the head to the heart, nothing seems to happen.
Once they connect with this emotionally, that’s when they know that not planning their departure can and usually does have a “snowball” effect. Lack of planning can certainly have a negative impact on the owner, but that is typically where it just begins. Not planning one’s exit from their business can have dire consequences for the owner’s family, the employees of the Company, and more times than not, the customers and suppliers to the business as well.
In other words, a lot of people can pay the price as a result of the owner’s lack of planning.
Ok, that journey from the head to the heart has taken place, thankfully! Now what? Effective planning can to done, but it is important for the business owner to know that planning takes TIME and that no one advisor can do it all!
I typically see that it takes a year or so to develop a comprehensive exit strategy, and then another three to five years to implement that strategy. Unless your business is one of the very few lucky ones that is in fact ready to transition, it can take years to make it happen and a team of advisors to do it right.
If you are like many owners where your business represents the vast majority of your investible estate, if you don’t figure a way to get that value out of your business, that’s when I typically hear a business owner tell me that they can’t imagine ever leaving their business.
What I am actually hearing them say is that they don’t know how to go about doing it, so staying is the only way they can continue getting the income that they need to maintain their lifestyle. I like to ask these owners what would happen if someone came up to you and offered you a million dollars in cash for your business, what would you do? Typically the response is, “I would be out of here tomorrow”!
So, what does a successful exit look like? It’s when an owner leaves when he or she wants to, for the amount of money they want and need, and transfer the business to whom they want. As I said previously, it takes Time to plan that transition, and it takes a team of qualified advisors to make it happen.
The more time that you have, the more tools there are in the toolbox. Without time, you are left with the task of building a successful transition, but finding yourself without a hammer or any nails. In addition, it takes someone with the expertise to serve as project manager.
I like to explain this to owners using a construction analogy. If you want to build your dream million dollar plus home, can you imagine first trying to find the qualified “subs” on your own, then if you achieved that small miracle, then calling them all together and asking them to figure out how to best work together.
No, this isn’t something that I recommend that business owners take on themselves, unless you also have a history of performing surgery on yourself. I also am often asked by business owners why a team is needed? Going back to the construction analogy, you certainly wouldn’t ask the plumber if he wouldn’t mind also doing the electrical, dry walling, painting, etc. That would be crazy!
Successfully leaving one’s business involves integrating business plans, with estate plans, with personal financial plans, etc., as well coordinating the various people with expertise in those specific areas. I know what you’re thinking!
To get out of my business is going to cost me a bunch of money. Yes, it can, but if you don’t spend the money how many dollars will you be leaving on the table? Exit planning is an investment in your business.
The fact of the matter is that much of what you will spend you should have been spending incrementally over the years, as most if not all of exit planning is just plain good business planning. Successful serial entrepreneurs always tell me that they would never buy or start a new business unless they knew how they were going to get out of it. Successful entrepreneurs are simply wired that way.
Ok, so now you understand both in your head and in your heart that you need to do planning in order to leave your business in style. So what do you do next? In the words of Lao Tzu – “The journey of a thousand miles begins with one step.” I encourage you to take that first step!
Ken Stiefler is President of eXITSTM LLC, a Business Exit Planning Company working throughout the United States. He and his associates have spent over 20 years crafting exit strategies for business owners of every stripe.