The goal of every business owner is to create more value in his business.
The value of your business is important because it determines not only the quality of your life once you leave your company, but also how long it will take for you to be ready to leave. The sad fact is, too many owners just work in their business instead of on it. When you think of it that way, most small business owners are really just glorified managers. They know how to do their job really well, but they never build a company that can live without them. In essence, they are the company.
Value Catalysts are the structures, people, and processes that help owners work on their business instead of in it. You may recognize these people, structures, or processes also as, ‘value drivers’, or ‘business drivers’, though I find the term too constricting.
Effective VCs are often the difference between true owners, and glorified managers.
Suppose you were to leave for six months, for any reason at all. Ask yourself, would your business be able to survive? If you find yourself hesitating, it is likely that your business does not possess the VCs it needs.
Value Catalysts are not limited to business, and they do not just create more zeroes at the end of a sales price. A Value Catalyst creates more energy, time, or money than it takes in. In chemical reactions, Catalysts spark change. They jumpstart a chain of events, and the same can be said for VCs. Businesses that are in the midst of transition are not the only ones that benefit from value catalysts. All businesses should be created to build value for their owners.
By implementing VCs, you can truly change the direction of your business and the quality of your life.
Ask yourself, “Will I prepare my family and business for my exit or will I leave it to the winds of fate?”
Often business owners don’t want to address their exit because it may entail giving up control of a company that they have poured their life into building. However, avoiding the topic of exiting does not change the basic fact that the time to exit will come, and that it is lucrative to have a plan for when it does. The question will never be, ‘Will I exit my business?’ but instead, the question is, ‘When I exit my business, will I do it well?” The sooner this question is raised and the sooner the idea of leaving is accepted, the more successful the outcome can be.
You may be wondering, ‘Where do I begin planning?’ and the answer is simple, begin with the end in mind. By establishing a finish line you are completing a crucial part of the entire exiting process. Identifying your finish line is as easy as answering the following three questions:
- When do I want to transition out of my business?
- To whom do I want to sell or leave my business?
- How much will I need to secure my financial independence?
Instead of fearing the inevitable, take advantage of the knowledge that you will eventually exit your company and work towards it with intention. Ease into your transition by creating a plan that allows you to exit in a way that leaves you fully satisfied in retirement, and with a successful business that continues your legacy. As Yogi Berra once said, “If you don’t know where you are going, you may not get there.”
Today, many well-meaning and successful business people are forced out of their businesses by events beyond their control…
…making exit planning absolutely imperative for the protection of their businesses. The failure to plan for a transition is the greatest threat to any family business bar-none. Though contemplating an exit forces a person to confront their hopes, dreams, relationships, and even their own mortality, the payout of their effort and planning is exponential in the success of their family and business after their departure.
Planning takes a lion- a leader who is willing to make the hard choices, the kind of person that leads in such a way that he lives and leaves a legacy. Planning a transition involves looking forward to an ideal outcome, but also involves contingency planning in case one is unable to reach their goal in the way they originally planned.
Whether selling a company or transitioning, the current business environment makes planning more critical than it has ever been. As it stands, nearly 50 percent of successful business owners plan on exiting their companies before 2020, however, most of these companies will fail to achieve the objectives of their founders.
Why is this? Because even firms with set plans in place will falter due to poor implementation and mismanagement. Statistics show that seven out of ten business owners have no exit plan of any kind. Worse than that, five out of ten family businesses have no buy/sell agreement, which means the very survival of their business is in danger. Of those attempting to sell to third parties, the number one reason a transaction fails is a lack of preparation on a seller’s part.
It doesn’t have to be this way though. A transition may be fraught with challenges, but it is also rich with opportunity. Instead of avoiding the topic of business exiting, see it as an opportunity to lay a foundation for lasting legacy. One day every business owner must exit their business—planned or unplanned!
Getting a business sold may take less than a year, but planning for the best outcome should begin five to ten years before your planned transition. With no guarantee of tomorrow, the sooner you start planning, the better!