There are four types of business owner when it comes to how your exit or ownership transition will come about.
- The entrepreneur who started their business with an explicit end in mind. They will have a time frame, an exit value and their future plans mapped out. It may not all go to plan but they have a focus on and work towards the eventual outcome.
- The business person who sees running their business as a substitute for being employed. They focus only on earning a ‘salary substitute’ and don’t consider building value to achieve future wealth so if there is something to sell when they come to exit they are unprepared to make the most of it.
- The owner who diligently builds a business, believes it must be worth something but gets to the point of wishing to retire and move on but has never considered how the end will come about and therefore may be disappointed with the outcome.
- The person who builds up their business, usually sacrificing short term gain (salary, dividends, time) and develop a plan for how and when they will transfer their ownership.
Which one are you?
If the terms of your exit are important to you then you might consider some help – particularly if you are thinking two to five years ahead.
When we start working with a business owner on their exit plan and preparing for their ownership transition we start by considering the needs of the individual(s). Our initial planning session works through a number of elements of an exit to create a ‘desired outcome’. Not everything you might want may be achievable or some elements may come at too high a cost but understanding the factors and the trade -offs is a great start point for your exit plan.
In addition to considering how much you would like to walk away with and when you would like to exit we will work through with you factors such as your attitude to deferred payments, conditions or performance criteria you might accept, your involvement in the business in the period between a deal being done and completion, elements of the business you want to protect, limitations on your future business activity if you are not yet ready to retire, plus anything else that is on your mind. This forms part one of our exit planning process.
If your future depends on achieving the right exit when you step back from your business this process will be of interest to you. Contact us to find out more.
(Flower photo created by wirestock – www.freepik.com)