Face the elephant to ensure post-exit financial security.
In business, avoided issues become the elephant in the room. You know they are there, but you are not dealing with them and they take up more and more space, hanging over your head.
For the business owner, ‘elephant in the room’ issues can mean the difference between a successful exit with maximum value for your business – or not.
To most small business owners the business is one of their biggest assets. If this is you, you are depending on a successful sale to fund the next chapter in your life. By not knowing the answers about key questions related to your business you are putting your future at risk.
11 questions business owners should be able to answer:
If you are like most business owners there are a lot of unknowns. Having the answers to these 11 questions will provide clarity, direction and a better exit when the time comes.
Do I have the correct structure to transfer my business in the future?
What is the current value of my business +/- 10%?
Do I know where the ‘quick fixes’ are in my business to increase the value in the short term?
Do I need to monetize my business to have a successful retirement?
Are my financial advisors helping me plan for this?
Do I know when my exit might be?
Do I know what to do if I get an unsolicited offer?
Will keeping my key employees be important to a buyer?
How do I make sure key employees stay? (Stay Bonuses)
Am I really ready to retire? OMG!!
What would happen to my value if I have a health event before I’m ready to retire?
No wonder most owners are frozen in inertia with so many questions swirling around.
Here are four simple ways to face this elephant:
1. Start by determining the value of your business — now. You do NOT need a full valuation taking weeks and costing thousands of dollars. Right now, you need to know two things. One:your valuation (LITE version =/- 10%). Two: what are the few things you can do to accelerate the value easily. Access tools and expertise to make this simple.
2. How much runway do you have in front of you? You will have to guesstimate the most likely time frame, plus best- and worst-case scenarios for exit. Have a plan for all three. Whatever plans you have are great and with the right help, be achievable. The mere act of articulating your exit and what you want to do later in your life will help — even if it is written in the sand at low tide.
3. How much money do you need to retire? After 40 years in the financial advice arena, I have asked hundreds of clients this question. No one has ever been able to answer the question. Advisors have all sorts of formulas that are weak at best; 70% of working income etc. I don’t know about you, but I spend much more money on weekends and vacations vs when I’m working. The best answer I have heard is “The amount of money you’ll need depends on what altitude you want to fly at” Knowing the number you need to fund your retirement plans makes it more likely to be made real.
4. What advice will you need, from whom, and in what order? Find an advisor with a simple cost-effective process with proven results for business owners.
Transition is inevitable. A successful exit is not.
The best advice is to do the work and/or get the help you need to build value in your company. Understand what that means specifically. Know the value of your company and where it ought to be.
It really comes down to being prepared, planning your goals and making sure you have the time to build value in your company. The result? You have a business people want to buy and maximize the sale proceeds for your retirement or next business adventure.