Begin with the End in Mind
Updated: Jan 8, 2019
As I continue to get older, perspective changes, including thinking about what’s next. I think I’ve always been someone that looks to the next thing, the next opportunity, or the next challenge. I’m never satisfied with the status quo. Although that drive has helped me in my career and in my business, it can be exhausting. I guess that’s why I’m a consultant, as there is always a new challenge, an opportunity to learn and create something better.
As I meet with business owners that are thinking about what’s next, every situation and every story is different. Some have built their businesses over generations and are now looking to the future of the business where there isn’t a family member looking to take over the business. Others have no interest in transferring their businesses to their children and/or don’t see the capabilities in their children to take it over. Still others are looking at the fact that their businesses have created a great lifestyle, but there has been no planning or effort put into what happens to the business when they’re done.
Being a business owner myself, it’s never too early to begin planning for your exit. The most difficult position a business owner can be in is having their wealth tied up in the business and the business not being salable. There is no exit at this point. The business owner is tied to being in the business much longer than they want because they need the income but are no longer engaged, resulting in declining value.
When looking at your business, profitability is a key component to value, but there are many intangible factors that create “true” value that a potential buyer is willing to pay for. This includes some of the following: management depth, diversification of customer/industry, niche product or service, recurring revenue streams, a growing industry, and replicable systems and processes.
When I work with businesses, we start with evaluating the current baseline of where they are at and then work to their future state. Knowing that the future state for each business owner is different. The key to any successful exit is business value creation. Whether you’re looking to exit in 2 years or 10 years, business value creation eliminates the need for a date, as you are always ready. We all like to think that we decide when we make an exit, however, the 5 D’s can radically change that time-frame: death, disability, divorce, distress, and disagreement. Focusing on de-risking your business and value creation sets you up to reap the benefits of what you’ve built.
When you started your business, the last thing you were probably thinking about was exiting your business. In fact, the excitement of building something was your focus. As you’ve succeeded in that effort, and the years go by, you begin to ask yourself, “now what do I do?” Similarly to planning for the end of your involvement in your business, planning for what you will do next is just as critical. How often do you start something without knowing what the end goal is? When you train for a race, the goal is to cross the finish line. When you have children, the goal is to raise them to adulthood so that they can start a life of their own. Yet, most business owners that have built a business have given little to no thought to the end goal. Instead, they are focused on the day to day and year to year, but never consider what happens when they are done.
Begin with the End in Mind!
“If you don’t know where you are going, then you probably won’t end up there.”
– Forrest Gump
Jayne McQuillan, CPA, MBA, CEPA is a strategic management consultant, and the owner of Journey Consulting, LLC, in Green Bay