If you don’t know where you’re going, it’s hard to know if you’re on track!
Stephen Covey put it best in his book, The 7 Habits of Highly Effective People, when he said “begin with the end in mind.” Understandably, many business owners get caught up in the day to day operations of running their business and lose sight of their goals. That is why it is critical that every business owner has an exit plan, no matter what stage of the business you are in. Whether you are just starting your business or are contemplating retirement, having clarity around what it is you are trying to accomplish and when you want to accomplish it are critical first steps in developing an exit plan that will help you most efficiently achieve your goals.
The first step in any plan is being clear on your goals. So what are your goals? While choosing a profession that you love can certainly make running a business feel less like “work,” the reality is that it is not easy running a business, and at some point you may want to free up time to pursue other interests. What would you like to do with your time? Travel, spend time with friends and family, or maybe pursue a hobby? Maybe you’d like to “give back” and help mentor someone new to your industry or a favorite cause. How much will your “financial independence”, that period of time when you don’t have to work, cost? Being clear on your “number,” the amount you need to have to fund the life you want to have when you’re done working, will have a big impact on how you run your business and what exit plan options you may have.
For some business owners, their business provides sufficient income to fund their current lifestyle and the savings they require to fund their future financial independence. In that sense, the business is more like a job. But what if that isn’t the case? What if your business is more of an investment? Something you have put a lot of hard work into and hope to someday realize some benefit from when you’re no longer working. How do you convert your investment into a nest egg that will support your financial independence? Will you transfer the business to family, employees, or a third party buyer? Whichever option you choose, it can take years to prepare for a successful transition, and being clear on where you’re headed will help you determine what steps need to be taken today.
Since it can take years to prepare for a successful transition, it is important to consider your timing. Do current market conditions impact your plans? Usually in tough times, the Darwin effect kicks in and it becomes survival of the fittest. Strong businesses will get stronger and take market share from weaker competitors. Where does your business stand in the food chain? Are you mentally, physically, and emotionally prepared to do what it takes to guide your business through these challenging economic times, or are you ready to start pursuing other interests? Additionally, numerous studies site a wave of baby-boom generation business owners planning to transition out of their businesses over the next ten years. Do you want to try and exit your business when the wave hits or are you prepared to either get out before it hits, or hang on until after it passes?
To improve the odds of achieving your goals, it is critical that business owners begin with the end in mind. Getting clarity on your goals and timing are important first steps in developing your exit plan.