Strategic Plans Require Flexibility
As the seasons begin to change again, the birds are singing, the leaves are popping, and the grass is getting greener; you can’t help but feel new energy and excitement. This is the time for spring cleaning, getting outside and doing some yard work, or just taking a walk and enjoying the sunshine. Whatever it is, it’s a time of change and a time of renewal.
Unfortunately, this year brings with it unprecedented change with COVID-19 changing our daily lives dramatically, and that of the entire world.
As a business owner, you begin to think about what the rest of the year will bring in terms of sales and profitability. How will this global pandemic affect my business in the short and long-term? What do I need to do now? What do I need to do to prepare for the future?
In order to make sure that you achieve the best possible results for the balance of this year and beyond, you need to have a plan. Whether you are thinking of selling your business in the near future, or taking it to the next level of growth, it’s critical to develop a plan and a path to get you there.
Sometimes the hardest part of putting together a plan is figuring out where you want to go. Let’s say that you are looking to exit your business in the next 1-5 years. What are you goals for that exit? Before you can determine your exit plan, you first need to determine where you want to go. So, let’s look at some key questions that need to be answered:
1. Have you done a financial plan? Is your business valued at a level that meets your financial goals at exit?
2. If not, and you need to grow your business to achieve the level of value, what strategies and action plans should you develop to get to the growth desired?
3. What option for exit best fits your needs?
a. Management Buyout
i. Do you have a strong management team that can run the company?
ii. Are they willing and able to obtain adequate financing to purchase the company?
iii. What, if any, seller debt would you need to provide?
b. Transition to Family
i. Are they capable of running the business?
ii. How will you transfer ownership? If an S-Corp, will it be through distributions and/or gifts?
iii. Will they need to obtain third party financing?
c. Employee Stock Ownership Plan
i. Is your management team strong enough to run the business, but maybe doesn’t want the personal financial risk of individual ownership?
ii. Are you looking to obtain tax advantages upon sale?
iii. What type of culture are you wanting to build/leave behind in your business?
d. Financial or Strategic Sale
i. Do you have a buyer in mind?
ii. How will you go about building a team of advisors to help you through this process?
iii. What about confidentiality?
Although this list is by no means all-inclusive, it is a starter for beginning to think about where you want to go and some options for getting there.
As I continue to work with businesses and business owners, sometimes the two most difficult questions that need to be answered are, “What do you want to do and/or where do you want to take your business?” These two questions can be overwhelming, and for many they’ve never done this before. Some have built their business through a focused strategy and plan, and others by happenstance. Regardless of how you got to where you are, getting to where you’re want to go takes some work, and I don’t mean just a focus on your business. I mean a real look at your personal goals.
It can be very scary to start thinking about “change” in terms of retirement or exiting of your business and what you’ve known for so many years. For many it means a total rethinking of the rest of their lives, including their marriages, their kids, etc. For others, it’s a renewed excitement to embark on new adventures.
Regardless of what your personal goals are, the key is defining them for yourself first.
“If you don't know where you are going, you'll end up someplace else.”
- Yogi Berra
Engaging experts that can help you through this discovery process can be critical to making sure that where you are going is where you want to go.
Jayne McQuillan, CPA, MBA, CEPA is a strategic management consultant, and the owner of Journey Consulting, LLC, in Green Bay