Writing things down is an important part of achieving your goals, both while you’re running your business and after you leave. However, many business owners feel overwhelmed by the idea of writing down their post-exit goals and strategies. Some business owners seem to think, “I’ll worry about this when I need to.” But this can be a trap that creates situations that could be even more overwhelming down the road.
How can you, as a busy business owner, begin planning for a successful future even if you aren’t ready to exit your business? The answer could be to create an informal, written business owner bucket list. This can also lead to some unexpected benefits!
Start small
Planning for your eventual business exit can be a big process. But just as an acorn grows into a mighty oak, starting small can be the beginning of something big.
To start, consider writing down the following questions in a notebook, on your computer, or in your phone.
1. In a perfect world, when would I retire?
2. What do I want to happen to my business once I leave it?
The answers you provide to these questions can be as short, informal, or unrealistic as you like initially.
The goal is not to create a fully fleshed plan in one sitting. Instead, the goal is to get you thinking about potential possibilities while you are still in a strong position to affect the outcomes.
What’s the point?
The process of planning for a successful future, both inside and outside of your business, can take years to execute. Starting early—when you still have control of your company and can leverage your business’ strengths—could position you to execute a strong exit plan as well as pivot more effectively if outside forces prevent you from executing your exit as planned.
For example, you might write down that you want to exit your business in 10 years, transfer it to a family member, and travel the world in retirement. This can lead you to consider several follow-up questions, such as, “Which family member would run the business instead of me?” and “Will my business be valuable enough in 10 years to afford me a comfortable retirement?”
As you build on your business owner bucket list, you can dive more deeply into the ideas and assumptions you have about your eventual exit. But the key is to just get started with something small.
Good for now, better for later
Another important question is:
3. How much is my business worth, and why do I think that?
Answering this question realistically can go a long way in helping you address assumptions you may have about your business.
When planning for a successful post-exit future, the most important goal for all business owners is achieving financial independence. Failure to achieve this goal upon exiting your business may mean that you need to go back to work for someone else. Few business owners find this prospect attractive.
Many business owners achieve financial independence through various means, but a large piece of that typically comes from the sale or transfer of business ownership.
This often means that business owners must develop their businesses to grow in value to support their pursuit of financial independence. This can be more challenging than business owners think due to common exaggerated assumptions about business value.
Reducing assumptions about business value
Businesses that look similar from the outside are not always similar on the inside. As such, using assumptions and rules of thumb could cause you to overvalue your business, which could prevent you from strengthening elements so you can sell for top dollar. This, in turn, can have a negative effect on your overall exit plan.
Many business owners overestimate the value of their businesses based on rules of thumb. For instance, you may see that similarly sized businesses in your area sold for a certain amount and then believe that your business can do the same. However, you may not have all the necessary information that went into achieving that sale price.
On the other hand, having an accurate, objective business valuation can show you where you are financially, compared to where you want to be when you exit. This can help you create and implement strategies that increase your business’s value and align your strategies with your exit timeline.
In many cases, if you wait until you are ready to exit your business, you may find that your business is nowhere near ready for you to exit it. Taking steps to strengthen business value long before you are ready to exit not only positions you to exit on your terms but also could make your company stronger while you’re running it.
This can open up even more avenues to take control of your professional and post-professional life. After all, if the business is less reliant on you for your success, it could free up more time for you to do the things you truly love in your business, rather than having to do it all.
In short, asking yourself what your business is really worth can help you avoid assumptions that can hurt your planning.
The big what ifs
One final question to write down in your business owner bucket list is:
4. What would I do if something unexpected happened to me or my business before I retire?
No business owner wants something bad to happen to them or their business before they’re ready to retire. But sometimes, uncontrollable things happen that have profound effects on your
future. Having strategies to address and overcome these unexpected events could help you protect yourself, your business, and the people who rely on your business.
Business continuity planning is a powerful strategy that could help address unexpected events that affect your business. Whether you experience an untimely death, debilitating injury, divorce, or other major life event that may negatively impact your ability to run the business, a business continuity plan can help your advisors, family members, and employees implement strategies in your absence.
In addition to serving as a mode of protection for your business, business continuity planning often includes instructions for how to address your needs outside of the business. For instance, many business continuity instructions include information about personal financial accounts, account passwords, and other important documents so that your advisors and family members can still execute your strategies to achieve your goals when you cannot.
Giving your advisors, family members, and employees a strategy for addressing your unexpected absence could help them survive and thrive, which can also help strengthen your legacy.
Don’t eat the bear in one bite
Creating your business owner bucket list lets you take small steps toward your biggest post-exit goals. This exercise can also reduce the overwhelming feeling you may have about planning for such a big event.
Taking smaller steps toward achieving your biggest goals can help you savor all of the strategies that you’ll implement to strengthen your personal and business standing These steps can also protect you from starting down a path based on assumptions that doesn’t lead you to the destination you were aiming for.
Consider starting your business owner bucket list today.
We strive to help business owners identify and prioritize their objectives with respect to their businesses, their employees, and their families. If you have questions on this topic, we can help with more information or a referral to another experienced professional.
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The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact an attorney or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Exit Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice that you need. This is an opt-in newsletter published by Business Enterprise Institute, Inc., and presented to you by our firm. We appreciate your interest. Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.
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