Ideally as part of owning your own business, you have a planin place for everything. But for some, the thought of what happens to their business in the long run doesn’t cross their mind until the retirement years close in. In the real world, the need for an eventual exit strategy often gets pushed aside for years by more immediate needs.
t’s easy to look up one dayand realize you’re closing in on a retirement date, are ready to pass the business along to a family member or sell, or even facing health issues. Any of these situations may mean you need a way out.
You’ll see many experts discussing how early you should have a plan for your exit in place, suggesting you think about stepping away from your business almost simultaneously to opening it. That scares many intothinking it’s too late to produce something. We’re here to assure you it isn’ttoo late to start planning.
A True Evaluation of Your Current Situation
A valuable first step is to zoom out a little and make a realistic assessment of your business and its future. You can start by answering the following questions:
How is my business really doing? Getting an answer tothis question can be approached from several angles. You should start by looking at your financials – revenue, profit, cash flow, growth trajectory, etc. If those look good, you can pivot to more qualitative data, like customer satisfaction, market share, competitive landscape, employee retention and wider industry metrics.
Does a family member have interest in continuing it? Sometimes there is a clear succession path between parent and children with the latter working alongside the owner to learn the ropes, preparing to take over the business down the road. However, in many situations the business owner may not have family directly involved in day-to-day operations. In these cases, current involvement may not directly reflect interest, so it’s important to ask questions to determine interest.
Is it an attractive acquisition for another business? In the home services industry in particular, acquisitions are made on a daily basis. Local companies combine forces, some convert to franchises and others are bought by larger organizations. If you discover that your business is on sound footing and no succession plans are in place with family, then finding a buyer can be an extremely attractive option and one worth exploration.
Starting Late is Better Than Never
Depending on how quickly you need to exit, you can choose between a few options. As mentioned above, passing along the business to a family member or selling outright are two popular options. Another is to shut it down completely, though few business owners would be happy with this result. Most would certainly prefer one of the first two options, and getting ready fo rthose requires some work.
No matter whether you wish to sell your business or pass it along to another individual, it’s going to require preparation. And if this hasn’t been your goal all along, it could mean some heavy lifting to get itinto shape.
Streamline. Once you’ve completed your evaluation, streamlining your operations according to its results is important before making any moves. This could mean reducing costs and improving profitability, as well as updating financial records and addressing any legal or regulatory issues.
Communicate your plans with employees. You don’t want to catch your team by surprise, so when you’ve made some decisions about the business’s future, share your plan.
Keep it together. If you’ve implemented phantom stockor another equity-sharing program, explore how that would pay out to those participating. If you haven’t already put this in place, offering this to key team members helps keep them in place during a transition and is worthexploring. The last thing you need is for everything to fall apart before you exit the business.
Conclusion
Yes, planning your exit strategy long before you need it is best. However, it’s never too late to put a successful strategy in place. You just need to find a place to start. One of your biggest risks is that everything will fall apart before the plan is complete when things are rushed. This is where planning with a partner like Reins can help you keep things together and experience a successful separation from your business and journey into your future.
Book a freeconsultation with us today to start planning for your future.
