Besides the desire for control and independence, many of us start our own businesses to also determine our own financial futures. However, as we move closer to our retirement years, being able to retire in a financially comfortable manner may not be a reality if we haven’t created a business that will allow us to do so.
Being able to retire in a financially comfortable manner may not be a reality if we haven’t created a business that will allow us to do so.
There are six basic succession or exit strategies business owners take to transition out of daily operations and direct business ownership:
- Sell to a family member or members (i.e., Child/children, sibling(s), other relative(s) )
- Sell to an employee or employees (i.e., Direct sale or transfer, ESOP - Employee Stock Ownership Plan)
- Sell to a 3rd Party (i.e., Sell to new owner, competitor, private equity firm, etc)
- Transfer ownership to family member or members
- Transfer ownership to employee or employees
- Liquidate / close the business (i.e., Liquidate assets)
If your exit strategy is option 4, 5 or 6 above, great. This approach works if you’ve invested and saved enough money throughout the years to retire in the manner you want. If your exit strategy is option 1, 2 or 3, the value of your business depends upon the type of business you’ve built. The more self-sufficient (i.e., Turnkey) your business, the more money it can generate when it’s sold. To determine that, I ask my clients one key question: Is your business viable without you?
Is your business viable without you?
If your business cannot operate without you being actively involved each day, for one week, for one month, for six months, or for one year, your business is not viable without you. It’s too dependent upon you individually. That may be because of key skills or experiences you have; your special relationships with clients; your management style; your inability to delegate, train and develop others; a lack of business systems and sound management practices; your business model doesn’t allow you to scale the business, etc… The reasons your business can not survive without you are critical. You need to face them and address them -- if your desired exit strategy is a profitable business sale.
- Do you need to create a scalable business model?
- Do you need to create a team with stronger management skills?
- Do you need to develop a stronger business infrastructure and business systems?
- Do you need to develop skills more deeply within your team?
- Do you need to become less of a micromanager and trust your employees to learn the jobs you’re paying them to do?
- Do you need to make staffing changes?
- Do you need to enhance your management team’s skills?
- Do you need to develop a stronger team so they are less dependent upon you?
Whatever enhancements your business needs to become a truly viable, turnkey operation, identify them, acknowledge them, and address them. When you make the enhancements needed and create a self-sufficient team and business, you’ll be able to sell it when you want, for the price you want.
Create a self-sufficient team and business so you can sell your business when you want for the price you want.
Get clear now on your business ownership exit strategy. Clarify with your team what you and they need to continue or start to do to ensure when you decide to exit, you’ll be able to do so on your own terms and in the manner you have planned. Then you can enjoy the retirement you’ve earned.
For information on how to create a solid team and business infrastructure, get a copy of my book Something Needs to Change Around Here - The Five Stages to Leveraging Your Leadership
Copyright MMXVIII - Liz Weber, CMC, CSP - Weber Business Services, LLC – www.WBSLLC.com +1.717.597.8890
Liz supports clients with strategic and succession planning, as well as leadership training and executive coaching.