#9 of the Top 10 Reasons Businesses Fail… Lack of a Succession Plan or Exit Plan

man-with-doorThere are many reasons why businesses fail.  One of the most common is that the business owners rarely plan the details of developing someone to replace themselves and how they will get out of their business.  Without those plans in place well in advance, the likelihood that their succession plan / exit strategy that will meet their needs or expectations is extremely poor.  And, it is very possible that the business may die, or will not yield the financial return that the business might expect.  But it doesn’t have to be this way…
When an owner starts on their path to start or grow a business, there is rarely a plan on how they will get out of the business.  Why? … working with business owners over the last 25 years,  here are the most common reasons…
  • They are too excited about building something – why would they plan to get rid of it?
  • They are passionate about the products they produce or the service they provide and feel like they will always want to do it
  • They like serving their customers needs, wants and desires – that’s why they went into business.
  • There is a ‘movie’ going on in the back of their head that they will grow this amazing empire.
  • There will always be time to think about how to exit.  There is just too many other things to think about to grow the business  
When an exit strategy is not determined in advance, there are some big challenges that develop. 
  • The growth of the business may not be balanced. Systems development is a powerful tool that will enhance the value of any business.  Most new businesses don’t invest the time to create those systems thinking that there will always be time later.
  • Succession plans to move the business to a family member or key employee are undefined, unclear and confusing.  You run the risk of loosing good people
  • The measures of Success are part of that exit strategy – and how do we know when we achieve success if we don’t know what to look for?
  • There is a significant change in perception when you know you’re only going to be doing something for a specific period of time – as opposed to ‘forever’
No matter what stage you are in the growth of the business, every owner should answer this question…”Will I want to exit my business”.  Most business owners will immediately say “Yes”, but few ever take time to consider the criterion that would lead to a transition to the next generation – like health issues, , a strong team to take over and run the company, family issues; or to actually sell the business – like, a great offer to purchase, achieving profit goals, changes in your industry, or economic conditions.   If your answer is “Yes” to this question – then you need to develop a transition plan and an exit strategy
 
Who should be involved in an exit strategy?  There are a number of thoughts about who should be part of your exit planning strategy, but here is a starting list for you to consider…
  • Key Family Members
  • Key Employees
  • Accountant / CPA 
  • Business Consultant
  • Executive Coach
  • Business Attorney
  • Financial Advisor
  • Business Insurance Agent

The process of successfully planning a succession plan and an exit strategy requires time, the right team of advisors, and the focus on achieving your goals.  A simple process, but not always easy.  But making the decision as far in advance of the transition date as possible will increase the likelihood of achieving the exit plan.

If you’d like to know more, please contact me at michael@abcbizcoach.com or call Advanced Business Coaching at 262.293.3166