Starting your own business, or buying a business that already exists will lead you down the path that will provide many challenges. Each challenge provides the opportunity to make decisions that could lead to potential problems, multiple mistakes and a high risk of loss. This premise is the reason why on 4 of each 100 businesses started ever see their 5th Anniversary. Of that small group that makes it to 5 years, only 1 will see their 10th Anniversary. The odds are certainly against the small business entrepreneur. But a small change in perspective early-on in the process can help provide the insights needed to avoid some of the traps, challenges and pit-falls that are found on paths taken by others.
About 20% new business owners have some type of written plan to GET INTO business. To design, implement, and grow their new business. Of those that have a written plan, on 1 or 2 actually have plan to know when they should GET OUT of the business. Knowing how long you want to keep the business, at what stage you may want to sell, or transfer, the business is a key part of helping you make decisions for the future.
If you were faced with making a$500,00o investment into equipment or real estate for the business, do you think your decision would be different if you knew you were going to be selling the business in 2-3 years? For some, the decision would be different, for others, it may not, BUT… it does change your perspective on the decisions that need to be made. Hiring employees, expanding into new markets, investment into new technology, etc. are all realistic decisions that you could be faced with. Each of these MAY be impacted by when we may be looking to exit the business.
Your business is a tool. It is designed to perform a function. It my be to provide immediate profit, long-term cash flow, grow market share, provide jobs for friends and family… it could be any or all of these things. But each owner NEEDS to know that they want from their business. Part of that is to know HOW and WHEN they want to get out of the business.
Picking an exit date some time in the future, and the conditions or criteria the need to be reached to trigger the exit plan should be part of the planning process. Whether you choose to transfer / sell the business to a family member or key employee, sell you all your employees, hire a manager and generate a consistent flow of income or just sell the business on the open market – all these things take time (usually 3-5 years to maximize ) to complete. A transition or exit plan doesn’t take place over night.
It will take much longer to prepare your business to sell than to get is profitable. And – if you don’t do it right, you may risk everything you’ve built.
Advanced Business Coaching works with a team of Transition planning professionals… CPA’s, tax advisers, business attorneys, personal financial advisers, to help our clients through the path of reaching a successful business transition / exit plan. If you’d like to know how this can work for you, and your business, call us at 262.293.3166.