Is this you?
When you retire, your plan is to sell it for a handsome profit, or transition to your children, who will build upon your legacy and make it wildly successful. Of course, because you are planning to retire within the next ten years, you already have a comprehensive, adaptable, plan that’s been updated annually and vetted by your accountant, lawyer and exit planner. Your partners, shareholders and heirs are all on board and prepared for every contingency.
No plan? You're Not Alone
If you’re anything like the average mid-market business owner, chances are you don’t have any formal plans drawn up whatsoever. This is likely the most costly mistake most entrepreneurs will ever make in their lives. We’re talking hundreds of thousands, if not millions of dollars.
Let’s take a look at why so few of you are diligently and strategically planning your exit:
1. You’re Too Busy. I hear this one a lot, and many studies confirm this is one of the most common reasons for not planning. Hey, I get it. As an entrepreneur myself, I understand all too well the demands on your time. When day-to-day operations eat up all the hours in your week, when are you supposed to sit down to hammer out a plan that you won’t be using for years? However, believe me when I say you absolutely must find the time.
2. You’re Not Sure Where to Start. Exit planning is tricky, and if you’ve looked into it at all, you’ve seen how complicated it can be and how many ways you can go wrong with it. And the consequences (legal, financial, familial) can be pretty severe if you get it wrong. Who wants to deal with something that overwhelming? A typical human response is to avoid it like the plague. I strongly suggest consulting with an experienced exit planning professional who can guide you through this process.
3. You’re Not Ready to Consider Retirement. I’ve encountered this mindset with countless numbers of my clients over the years. Your identity is your business, so how can you imagine your life without it, and plan for other people to take over something that is such a big part of who you are? Nonetheless, you must start planning for life after business, to ensure the best possible outcome for yourself and your loved ones.
4. You Need to Build Value First. I applaud you for this one, because you owe it to yourself to make your business all it can be before you sell (or hand it off) to maximize the return on your investment, and generously fund your retirement. Value-enhancement is the cornerstone of every solid exit plan. If you’re within ten years of retiring, this is where the majority of your time should be invested. But there are several other crucial factors you need to address as well, and a professional exit planner can make sure you’re dealing with every one of them. This is not an event, but rather a sequential process we work with clients over time.
5. You’re Using Your Business to Save for Retirement. Sure, you want to use your monthly business income to pay off your mortgage, contribute as much as possible to your retirement saving accounts and build your portfolio. But chances are, your business is worth significantly more than your stock portfolio or your home. Rather than focusing your energy on day-to-day business management, it would likely serve you better to hand off operational tasks to someone else while you focus on adding value and reducing risk so you can sell for maximum profit and fund your retirement much sooner.
It's Not Too Late: Failing to Plan is Planning to Fail
I understand all of the reasons for not having a solid exit strategy yet. But I want you to understand why it’s absolutely critical to have one. Chances are you already know, and just don’t want to think about the fact that people who don’t make a plan generally lose their business to one of the five D’s: death, divorce, disability, distress or disagreement. Which means you (or your heirs) will likely get a fraction of what your business could be worth.
Need help getting started? Want an experienced ear to hear about your situation and offer some advice? I specialize in working with business owners to build value in their companies. That all starts with a personalized plan that will enable you to get the kind of exit you need and want.