Rethinking retirement and succession plans
Thinking about how I might retire from owning this business is giving me a headache. I don’t have enough money to walk away and not work again. I haven’t been able to fund retirement for the last two years, although things are getting better now. No one can run this business in my absence. And I have no idea who I’d sell it to or why they would buy it.
Thoughts of the Day: Building an out is every business owner’s responsibility. It’s easier to plan if you think in long time frames. Defining needs is a good place to start. Work on options to sell and reasons for buyers to engage in buying the business.
Lots of business owners get into the business without a clear idea of how to get out. They get caught up in the day to day, working “in” the business rather than “on” it. Or they confuse planning for exit with planning for their own mortality, which may be a subject they’d like to avoid at all costs.
Let me propose an alternative approach to thinking about exit. It’s the reason the business exists – to have a future. Build for a robust business future without being tied to the owner and the business will survive. Make the business dependent on the current owner and it has little chance of continuing on past the current shareholders.
There are a number of tools that will help the business survive the long haul. Involve managers in the future planning and measurement of current results to help them better understand how the business runs and where it’s going. That way they can step in and take on more responsibility.
Succession plans for the owner and other key managers will help the business weather a transition and minimize disruption. Trying to do it last minute makes it nearly impossible to do the transition well. Finding the right people to come in and take over is a special deal. Not everyone is right for the job.
Be clear what it is that you want out of the business. How much money do you need in order to retire? Do you want to retire cold turkey or would you like the option to work part time? How important is it to secure the future jobs for employees who have helped you get this far?
If you know what kind of money you want to take out of the business, you can then figure a number of other answers. How much money do you expect to get for selling the business? How big and how profitable would the business have to be to achieve that sale price? How much does the business need to grow in order to achieve the optimum exit?
Get what you want from an exit strategy by working backwards, building a plan and giving the plan enough time to come to fruition. Once you’ve laid out the planning parameters of size, profit/year and time frame to exit, you can plot out how many employees you need to add, how many clients, how many additional products and services.
Do you have the right people on board to help you see this through? Getting people invested in planning for the future without you is going to be critical. Teaching people to see this as an opportunity to secure their futures in building a company that someone else would want to buy.
Unlike the first few years, where your focus is on getting the business built, in the later years, you want to customize business for future buyers.
Andi Gray is president of Strategy Leaders Inc., strategyleaders.com, a business-consulting firm that specializes in helping entrepreneurial firms grow. She can be reached at (877) 238-3535. Do you have a question for Andi? Please email it to AskAndi@StrategyLeaders.com.