In the fall of 2005, I created a 10-year goal plan to expand my company, have all the right people in place, refine my systems and procedures, and to exit out of my company by the time I turned 60 years old. While I accomplished most of those goals, one goal not achieved on time, was my exit from the business. I am now 66 years old, and thankfully and finally, in contract to have my business sold by the end of this year. However, I missed the mark by six years. What happened? A lot of unforeseen events. What I learned from my experience is that you are never too young to create your exit strategy.
Many of you reading this are probably thinking, “I’m young, I am just getting started. I have plenty of time to start thinking about an exit plan.” Well, no one has a crystal ball, and life may throw you a curveball. Such as a serious illness or an accident. It doesn’t matter if you opened up your business yesterday or if you’re a thirty-five-year seasoned veteran. You need to prepare for the unexpected and you need to prepare for the day you retire from your business.
There are many components to an exit plan, and above all, you must seek the advice from your attorney, financial advisor, and accountant. In this article, I will give you real-life tips that will help you plan for your future and also help to build a more profitable business along the way.
It all starts with having clean and accurate financial statements. Essentially, you need to show a profit, have a cash reserve, and show growth over time. A prospective buyer will look at your financials and determine how much they are willing to pay for your company. In addition, in a tough economy, having good financials and reserve cash will help you weather the storm. Another thing to consider, if you need a business loan, having a strong balance sheet will help get you the funds you need.
You need to have the right people around you, what we call superstars. I know it’s a struggle these days finding quality people, but this must be at the top of your list. Having the right people in your company helps to ensure that your business will run smoothly, remain profitable, and grow.
Work your way out of your business. I am not suggesting that you become an absentee owner. That’s your choice. But the truth is, no one wants to buy your job. Being too deeply involved in the day-to-day does not attract qualified buyers. A side benefit: You’ll have less stress and be able to spend more quality time with your family.
Regularly review and refine all procedures and systems. It’s well-known that when you buy a franchise, you buy a detailed plan, a playbook. That has value. If you can demonstrate that you have an efficient running business, based on systems and procedures, this will have a greater value to a potential buyer. And of course, the added benefit again is less stress and more quality time away from the business.
If at all possible, purchase the property. When you own the property, you have more options, and the financial gains are much better than if you lease. If you do lease, make sure you have a qualified real estate attorney that can negotiate a lease that gives you the best options, and one that looks favorable to a potential buyer.
Create a timeline with a firm goal date for retirement, succession, or exit. Don’t delay on this. It can always change, but you need a plan with a firm goal date on paper, not just a wish or a dream.
Lastly, dedicate time to work on a detailed business plan that outlines the next 3 years, five years, ten years, etc. Having a pathway to your future doesn’t mean that you will follow the plan exactly as it’s written, but it will put you on a smoother road to a more successful future.
Are you wondering why I didn't achieve my exit goal at 60? While I had many opportunities to sell my company, most of the deals were not right for me. In addition to the selling price, I needed to take into consideration my employees, the community, and my legacy. Once I found the right buyer, the decision to sell fell into place.
If you do all the things I outlined above, you will not only have a business worth selling when the time is right for you, you will have a more profitable and less stressful business along the way. Do you still think you’re too young for an exit plan?
