“The things you do for yourself are gone when you are gone, but the things you do for others remain as your legacy.” – Kalu Ndukwe Kalu
Although the taste of success is sweet, the reward of leaving a legacy is even sweeter. In business, as well as in life, if you are not moving forward, you are moving backward. Anything that isn’t growing, is dying, or is already dead. The goal should not to merely be successful financially, but to be significant in the lives of others.
In Galatians 6:7 the Bible says “a man reaps what he sows”. This is true. Many times the proof can be found in the lineage of the family, through the lives of the sower’s children and grandchildren. The parents that ignore their children, coddle them, or neglect to teach them, often end up with broken families. Their children self-destruct, starting a cycle that may last for generations. The parents that teach their children well, in every area of life, tend to have families that love each other, work hard, and share common values based on faith in God. These Legacy Families generally continue to create more Legacy Families, thus having many generations living lives of significance, having learned from their ancestors.
Never be afraid to take up the fight to make this world a better place for your children and grandchildren by building families and businesses that thrive and endure for generations. Make the time to love and teach them. If you have children, being a good parent is your most important role in life. Live balanced lives that include being responsible parents and grandparents as well as building a business for which you can also be proud. Leaving a legacy isn’t easy, it takes guts and determination, but don’t let anyone convince you that it is impossible! As the Bible says in Mark 10:27, “all things are possible with God”.
So you’ve pulled it off, you have successfully exited your business!
Many business owners live for the day that they can finally sell their business or pass it on to the appropriate heir, and when they do it often comes with a sigh of relief.
Though this often marks as a time to celebrate, it is also a time to take a step back and recognize that you’re not quite off the hook. Post sale is where many owners go awry, which can make the sweetest season of life a stressful and trying time. Owners often dream of the day that they can relax, spend time with their family, and enjoy the little things in life, however it is quite typical in this post sale time for owners to blow through their money, lose it, transition poorly, or create inner family feuding.
Transitioning from a business should open up a world of opportunity, where you can devote your time to philanthropy, community volunteering, and church events, instead of a time of strife. The unfortunate fact is that many owners will find themselves in a very different place after exiting a company than where they originally imagined. As a result, it is vital that owners envision their post-business life long before the sale is final.
Never presume that because you could run the company well, you can also run the capital well. Once a sale goes through, owners should take measures immediately to diversify their holdings in order to lower risk. The best way to address redeployment of assets is through a comprehensive wealth management plan that determines how much income is needed to keep pace with inflation and provides the owner with the lifestyle he desires. Remember that wealth is a burden as well as a blessing to you and your family. As Jackie Joyner once said, “It’s better to look ahead and prepare, than to look back and regret.”
Anyone looking to sell their company to a third party knows that the first step in sales readiness is to examine the market, but what happens after that?
Simple. This is the point where you will need to factor in competitors, potential buyers, industry acquisition activity, and your own competitive advantage.
Advisors will want to look into the insights you have on your competitors, and if any might be interested in buying your company. A helpful hint during this process is to also have your sales team know how your company measures up to applicable industry standards. Listing competitors, vendors, and others outside of the company who you think could potentially benefit from buying your business is incredibly valuable. By conducting an analysis on all of this, you will aid in receiving a higher selling price from strategic buyers.
Understanding your own company’s competitive advantage is key to a successful sale. Take a step back and ask yourself the following questions. Do you know why customers buy from you instead of from your competitors? Have you thought about developing and verbalizing your competitive advantage? What about how to better position your company to appeal to buyers? Owners who know why their customers prefer their business can have an enormous advantage when it comes to bargaining. Knowing exactly what makes your company better gives you a better ability to negotiate a superior price.
When selling or transitioning to an insider, pre-sale planning is just as vital as it would be for an outside sale.
Insider transactions often involve rewarding a long-time and loyal employee, while also extracting value from the business for your own family and retirement at the same time.
In order to ensure a successful transfer you must remember these three primary objectives:
- Transfer to whom you want
- Transfer when you want
- Transfer for the price you need or desire
The most effective way to make this happen is to ease into the transition.
First, have the new owners replace you in the business operations, meaning that you will need to slowly transition out of the leadership position. Next, slowly transfer ownership without losing control. There are a handful of ways to do this, but you should establish objective standards for your potential successor to meet before the ownership is sold. These objectives should consist of receipt of purchase money, release of your personal liability to the business creditors, plans to pay off business debt, etc. From there, with the appropriate amount of time, you should begin transferring a substantial portion of the equity ownership. The final step is to transfer control when, and only when, all of your ownership objectives have been met.
Whether you have a group of individuals who would jump at the chance of buying your business, or you have a key employee in mind for the transfer, the sooner you plan and make decisions, the better.
Though many wouldn’t guess it, the transition of your business to a family member can be the hardest transition to pull off.
Naturally you would assume that handing off your business to like-minded individuals whom you love, and who love you, would be easier than any other passing of the proverbial torch; however, this is not always the case.
When transitioning your business to your children or other family members, there are a myriad of other factors to consider that exist outside the financial sphere. With family comes conflict, emotions, and sentiments – on top of everything else you must consider when making the big change into retirement. The unfortunate, but very true reality of the transitioning to a family member is that simple family conflicts have the potential to completely derail the entire process.
It is quite typical for business families to suppress their conflicts in the name of professionalism, which can lead to uncovering some hard feelings from past situations when it’s time for you to make your exit from the company. Any change as large as transitioning has the potential to turn into a power struggle no matter how much your family loves you. The key to smoothing relationships and maintaining transition momentum is the understanding that the problem at hand is unlikely the actual issue, but an old wound reopened.
There really is no perfect formula for timing a transition, or for creating a succession plan. Every business is different, but the key to success in any situation is to accommodate opportunity and manage risk. You simply must understand your own family situation and the business environment around you. No matter what your situation warrants though, it is best to recognize that the sooner you address these issues, the better.
Often we hear of people leaving their legacy on the world, and in their families, but what does that mean?
Leaving a legacy means to hold onto heritage, history, and family identity. What is a simple and ultimately rewarding way to achieve leaving a legacy? Through stewardship.
Stewardship is a word that is somewhat outdated in the modern world but that should be held in high esteem. Stewardship is an ethic that embodies the responsible planning and management of resources. The concepts of stewardship can be applied to the environment and nature, economics, health, property, information, theology, etc.
Wise stewardship is about more than just taking care of your money—it involves many facets of life, such as your talents and time. You are more than your net worth. Most people understand time to be the most valuable commodity. Donate your time and talents to the next generation, as well as the community.
Your abilities and money are gifts that have been given to you for a purpose. Don’t forget to give. On top of benefiting others’ lives, donating brings deeper satisfaction and enjoyment. A family that neglects to steward the hearts and minds of its members fails to build interfamilial relationships. That family will ultimately crumble. Building a legacy of wise decisions and counsel for your family is not something that you can save until later. Relinquishing a portion of your income can teach you and your family valuable lessons in stewardship. Those who make money their sole aim are never good stewards and often fail to leave positive legacies. But if you can give your dollars away freely, you are telling money that it has no power over you!
Every business owner knows that longevity, not just short term probability, is the goal of any company.
In order to ensure this durability, one must be devoted to creating a business that can last for generations.
Business durability and continuity face two key challenges: the loss of an owner and the loss of the company’s key talent.
Would your business be able to survive without either? You may not want to think about it, but it’s an important discussion to have. You, your company, and your family need to be prepared in case of an emergency. To be successful in business, you must have vision and optimism, but unbounded optimism can lead to being an entrepreneur’s Achilles’ heel. Optimism, though usually a good thing, can make owners avoid planning for anything other than an optimistic outcome when left unchecked by realism.
Whether engaging in the rest of the exiting process or not, you must make sure your business can survive your death, disability, or retirement, as well as the loss of its key talent. Without a plan, and without the ability to function without these two pieces, a company cannot expect to last long. Durability only comes with preparedness, and though it may not be a reality you want to face, a company will only last for as long as its values are in place. The only way to ensure successful longevity of happening is to foresee problems and solve them, before they threaten your company.
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!