Most business owners have assumptions about the road to successful sale of their business. The bad news is that these assumptions are often flawed. The good news is that correcting them with facts is relatively straightforward. Here are 5 wrong assumptions, and 5 suggestions on how correct them.
Assume Exit Planning is the Beginning of the End. I talked with a business owner about exit planning, and her primary fear was that others would see it as a sign of weakness or giving up. She worried that her employees would start polishing their resumes and competitors would smell blood. Maybe you have a similar mindset. If so, train your brain to see “exit planning” and “growth planning” as two sides to the same coin.
Assume a Family Member has the GWC to Take Over Your Business. If you want a family member to take over your business, you might be assuming that they get it, want it, and have the capacity to carry forward. This assumption might only be that: an assumption. Maybe they can grow into it, maybe they would rather play a supporting role than leading the company, and maybe they don't want to run it at all. You don't have to take this personally. But you do have to know if they have the GWC component. Instead of assuming this, read the People Component chapter from Traction, and have an honest conversation with your potential successor about their goals.
Assume Your Business is Worth Buying. Just because you are ready to walk away, does not mean that you are ready to sell, nor that your business is worth anything if you're trying to sell it. If you don't know what you were potential range of value is in your industry, if you have not done readiness assessments (insider’s perspective looking out) or attractiveness assessments (outsider looking in), you have no reason to assume your business is market-ready. Even if you have a potential buyer, they might be buying you at a tremendous discount unless you take some time to work on your value factors. You might be leaving money on the table if you're not careful. Instead of assuming your business is worth something, conduct a Triggering Event, which you can read more about in our 11th blog in this series - Read Here.
Assume an Employee Can Afford to Buy You Out. We have a saying in this industry: “Every business buys itself out.” You cannot assume that an employee that works for you full time can save up enough money simply from their own paycheck to pay you what the business is worth when you are ready to sell it. You have to do business and personal financial planning to get here. The good news is that there are countless ways of redirecting cash, saving on taxes, allocating for future buyout, structuring corporations, and leveraging your retirement plan to get you here. Instead of assuming they can buy you out, get your exit planning team working on all the options and narrowing down the best ones for your case.
Assume You are Ready to Retire. Just because you hit age 65 doesn't mean you want to leave your business. If you have not taken the time do you envision and plan out life beyond your business, if you have not consulted with your spouse, your kids, and even your friends about what life could be like after you leave the business, it's time to get serious about personal readiness. This business has been demanding significant time every week, you are going to need to replace this time with meaningful activities. What is your next act going to be about? Who are you going to be a hero to in the next phase of life? What impact do you want to make on your corner of the world? Instead of assuming you are ready to retire, have a trusted advisor walk through a personal readiness scorecard with you.
Final Thoughts
Each one of these assumptions could derail your exit planning. But none are so difficult they cannot be solved with some honest self-reflection and a bit of homework.
Any opinions are those of Timothy Weddle and not necessarily those of Raymond James. The foregoing information has been obtained from sources considered to be reliable, but we do not guarantee that it is accurate or complete, it is not a statement of all available data necessary for making an investment decision, and it does not constitute a recommendation.
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