Note: www.buildcompanyvalue.com has three free, online, secure assessment surveys which correspond to these factors – to help you take stock/assess.
75% WOULD EXIT TODAY IF THEIR FINANCIAL SECURITY WERE ASSURED.
Many owners would exit now if they thought they could swing it financially. But virtually everyone overestimates the value of their business – it’s a rather normal, human assumption. Many also make assumptions about the ease of finding a buyer, the price they’ll get, how long that will take, what taxes will come due, how much they’ll need, etc. Many forget to factor in expenses they’ve grown accustomed to that won’t be paid in a post-owner world (the boat, the yacht club, the golf club, the car, the beach house, the ski condo, etc.) These can roll up into the hesitation – too often a delusion - that they really don’t need to do anything now. They’ll just do it when they get ready. Most wait too long to get an actionable valuation. After all, this never has the press of today’s business issues. Some owners see the uncertainties, dilemmas, and decisions – and just stay focused on today’s urgencies. When people finally start, and begin to test their assumptions, many owners discover they need to increase their business’ value and wish they had started sooner. A rule of thumb is one year of preparation for every decade of operation. It’s all about making their business attractive to the next owner. And giving oneself the best chance – and the time - to load it for success.
84% BELIEVE WRITTEN PLANS ARE KEY – ONLY 17% HAVE THEM
Transition Realities are Disturbing
The Exit Planning Institute has discovered some ugly realities in their research:
75-80% OF BUSINESSES THAT COME TO MARKET DON’T SELL
65-70% OF FAMILY SUCCESSIONS DON’T WORK OR LAST
75% OF OWNERS REPORT BEING UNHAPPY WITHIN A YEAR OF SELLING.
The bleakest future is for a small business that has few factors to make it attractive to buyers – little, other than the owner’s personal reputation, to differentiate it from its competitors. It depends on the ongoing efforts of its owner to produce revenue. It has a number of employees who are only trained on the job, or who possess few distinctive skills that make them an integrated part of the business. It has no incentives that enroll the best performers in long term relationships. It lacks middle management, or anyone who can run the business indefinitely without the owner around to make decisions.
If that describes the business you own, it is time to start making changes. The generation that is reaching business-buying age has more choices for earning a living, and many more choices that better fit their values.
The economy is long overdue for a correction and there are signs that it’s coming – stock market volatility, flattening yield curve, trade disruptions. When that happens, the circumstances for selling a business will tighten. At some point, the demographics will shift to a buyer’s market. It could be a perfect storm.
Meanwhile, as time passes and circumstances unfold, a natural process unfolds:
Businesses get more complicated, demand more. Owners may feel less enthusiastic than they once were about devoting all their energy to work. It’s normal to begin to want some relief from the responsibility. A friend of mine once described his longing for just simple decisions like “paper or plastic?”
Owners become frayed as they become steadily more challenged by having a bigger, more complex business. This burnout creep diminishes the attractiveness of additional growth.
People may get frustrated because the strategies they used to grow their companies in the early days don’t work as well as things evolve.
Anxiety rises as owners look around and see unfortunate, unexpected things happening to good people.
By the time they finally decide to exit their businesses, owners simply may not have the energy to plan for it, prepare or carry out actions to optimize their exit process with optimal price, terms and timing. After expending so much time and effort building their company, planning for the future may seem tedious and difficult, even pointless. But what’s done in the last lap can make a huge difference – be transition-ready when unexpected problems or nifty opportunities arise. The last lap really counts…..transition-ready companies are worth more …. and owners sleep better with the additional time and financial freedom that brings. Having a proven planning roadmap is extremely helpful:
Finally, most owners benefit from some important education about exit options, as summarized below:
What’s your number? Could you swing it financially or not? How ready are you and your organization? How do you know?
Three final suggestions:
Thank you, in advance.
