The business transition process is complex and involves business owners consulting with several professionals, such as M&A lawyers, advisors, brokers, and accountants. Understandably, many business owners are so busy managing daily operations that consulting several professionals seems daunting. Also, the implications of creating a business transition strategy further make business owners disengage from the process.
However, I find that what helps ease concerns are the following:
- Business owners knowing the professional resources they need empowers them because they are strategizing the highest return on investment in their business by covering all their bases.
- Business owners understand how business transitions occur not only in the event of death but in emergencies, disability, divorce, retirement, or others, safeguarding their business and assets in the case of the unpredictable and unexpected.
- Create simple yet comprehensive plans to strategize their business transition.
When working with me to strategize your business transition, we will consider only the necessary resources you need and work on your financial readiness by developing financial projections through assessing taxes, revenue, and cash flow for transition funding. Then, we will build the next leadership using performance plans – whether passing the business on to a family member, employee, or a third-party buyer.
Hi, I’m Charlie Janes: FocalPoint Business Growth and Value Advisory. I had a series of meetings today with clients and their advisors and I just want to pass on some observations.
Many times when advisors mention the idea of creating an exit plan, business owners get nervous: they don’t want to invest the time because they’re so busy in the day-to-day, or it just feels so permanent and scary. To them, sometimes business exit means one thing when it could mean a whole other thing.
There’s a whole spectrum of how to exit a business: from selling it fully or partially to a third party to transitioning it to your employees or your children or pulling an investor who will take over the business, and so forth.
So here’s a couple of things to think about.
According to the Exit Planning Institute, only 20% of businesses that are put up for sale sell, and 75% of business owners that sell their business regret the terms or, you know, their life afterwards because they haven’t planned for their next act. Additionally, 95% of the time, they’re not happy with the price that they got because they didn’t do the homework to improve the value of their business or to actually grow their business to its fullest potential.
So I have three pieces of advice I want to pass on through today.
Consult With an Interdisciplinary Advisor Team
One: it’s a great idea to have an interdisciplinary advisor team. I work as a business growth coach. I help business owners grow their EBITDA and their profit but it’s important I work with the CPA, trust lawyers, other business lawyers, and other business advisors – especially estate planning attorneys – so that we secure the future of the business to transition in the event that something unexpected happens like death, divorce, disability, disagreement, or disaster.
Have a Vision
The second thing is that it’s important for owners to visualize the future that they want to have when they step out of day-to-day work. It doesn’t mean that you can’t stay with your business in an advisory way or start a new business, but it’s important to think about what you want your life to be.
Make a Business Growth Plan
And the third thing is to have a business growth plan that includes a couple of things: your revenue goals for three-to-five years out, your profit goals, and evaluation. So get an evaluation now, benchmark how much your business is worth, and set a goal for how much you want it to be worth.
Also, benchmark how many hours a week you’re spending on your business now and what you want it to be three to five years out. And, finally, what percentage of your time you’re spending on strategic activities today in visionary roles versus down in the business?
If you’re spending a lot of time in sales and marketing, your business isn’t worth as much as you think it is. So by making the effort to improve that, you’ll get more profit now and more valuation later.
If you want to talk about this more in detail call me at any time: my number is 650-867-0207. Have a great day, I hope this was helpful and I am looking forward to helping you and your business reach your fullest potential in the next season.
