I saw a post today in a business forum, where someone asked what people were doing for exit and retirement planning. The answers were similar to “planning to retire 2 weeks before I die” or “when they take me from my desk feet first”. Unfortunately, my experience has shown that this typical more of the reality then mere sarcasm.

The most unfortunate situation I repeatedly see as a consultant, is someone coming to us for a valuation of their business so they can sell it, because they are ready to retire. We then have to tell them they can’t sell it, because what they thought was their most valuable asset has no resale value, and they have no real option other than to keep working.

The Day Chooses You

We will all have a last day in our businesses. The day that will be the last morning we get up and head to the office. The last day that we last walk in and greet our team. Here is the catch. We all think that we will choose that day somewhere down the line, but it doesn’t work that way, the day chooses us. All we can do is prepare for the inevitable. The level of your preparation will have a direct impact on if this day is good or bad.

The day can choose you in many ways. It might be due to a bad diagnosis regarding your health or the health of a family member. It might be an accident that claims your life and leaves your family to deal with the liquidation of the business.

It’s not always doom and gloom, the day may choose you in a way that is good. You never know when a competitor will go on a buying spree looking to expand, or when your industry may become the next darling of private equity investors looking to get in on the next big thing. Things like this can lead to an unexpected knock on your door.

The question is, will you be ready when it does? Trying to time these things is like trying to time the stock market, you think you can do it, but in the end you will be wrong. In my own case, I had a 10-year plan to exit my business, but an opportunity came to sell to a large national company that had a lot of private equity money burning a hole in their pocket 5 years, and 9 months into that plan. It was unsolicited, and unexpected.

Prepare Early

They say the best time to act is 5 years ago, the second best time is now. So, what is the best course of action? Simple, make sure that your business is always in its best possible condition for sale. This way, when the day chooses you, your outcome will be the best possible outcome at that time under the circumstances.

There are a few simple things you need to focus on to get the best possible return on investment and to make your company attractive to prospective buyers. However, don’t confuse simple with easy. You need to be considering these things well in advance.

  1. You need to be working on the business, not in the business
    If your clients only want to work with you, you don’t own a business, you have a job. You are self-employed, and the job has no resale value once you are no longer there. The most important thing you can do is hire someone to do your job, and then start running accompany.
  2. Documented repeatable process
    You can’t have someone do your job, or any other job in your company consistently unless you have documented repeatable processes that people can be trained on, and their performance measured by.
  3. Profit
    To be attractive to a purchaser your company needs to have consistent predictable profits year after year. If you want to get a best in class offer you need to have best in class profits. To get best in class profits, you need to stop doing AFAB (anything for a buck) and offer needed services that fall within your core competency to a select clientele that appreciates the value you bring.
  4. Linchpin Redundancy
    You need to cross train team members and be confident that no one critical function of your business relies on only one person to be completed.
  5. A roadmap and a compass.
    To get someplace new you need to have a map that shows you the way, and a compass that tells you where you are in that journey at this moment. In business your roadmap is a business plan. Something in writing that says, this is where we want to be in ten years. This is where we need to be at the end of this year to be on course for that ten-year goal.The compass that tells you where you are in this journey is a budget with accurate forecasts of revenue as well as expense. If you have an accurate budget the budget to actual report found in most all accounting systems will tell you if you are on track, off track, and if off track exactly what course correction is needed to get you back on track.

If you focus on these items, you can rest assured that when the day chooses you, you will be able to walk away with the leverage you need from your biggest financial assets. I hope for all of you that it will always be under the best of circumstances. However, if it turns out to be under less then optimal circumstances you will at least have one less thing to worry about, and the resources to make the best of whatever situation life throws at you.

For more information about how to profit, grow, and exit your business contact us at info@encoresc.com.