When You Don't Have All the Answers
When you don’t know what you don’t know, find those who do!
Recently I spoke at an Economic Development meeting in northeast Wisconsin about the economic shift that is occurring with the baby boomer exits from their businesses. As I was presenting, I couldn’t help but reflect on all that has happened over the past three years since we went from what we thought was normal to what is still being defined as the “new normal.”
This year in particular has been a roller coaster of a ride. Both of my parents passed away within six weeks of each other. We welcomed our first grandchild, our son got engaged, and our daughter relocated for her first job as an occupational therapist.
Does this roller coaster sound at all familiar? While the details of your journey are different than mine, I’m betting you’ve experienced ups and downs that have made your stomach drop more than once.
The rate of change that we are dealing with in our businesses and personal lives has not only accelerated, but the changes that we are experiencing are more challenging and require that we engage other resources to help us navigate successfully.
An example of this for me was when my dad unexpectedly went into the hospital, was then moved to a nursing home for rehab, back to the hospital and transferred to another hospital, all within a span of three weeks. Now, I’m not a medical professional, and I was definitely in over my head. I needed to use available resources - the experts who were there to help guide me through this confusing and often frustrating system - to make sure that my dad was taken care of the way I wanted him to be. Shortly after, my mother went into the hospital and was diagnosed with a cancerous tumor that was terminal. Now I needed to navigate hospice and her care. In addition, as trustee of their estate, I had to figure out the legal system and handling of their affairs.
Like many of you, I like to have the answers. Knowledge is power. In both of my parents’ situations, I didn’t have the answers and felt, at times, utterly helpless. I wanted to fix what they were going through, and I wanted to have all the answers to negotiate whatever came next.
As business owners, we often think we are expected to have all the answers, but sometimes feel ill equipped to handle what we signed up for. Let’s face it, when we start down a path, such as starting or buying a business, we rarely think about the end game. Or, if we do think about the end game, we have a rosy picture defined. Such as, “when I’m ready to retire, I’ll just sell my business to_________ (fill in the blank - my kids, my management team, a third party).” Many times, we have no idea what that looks like or even how to achieve that outcome.
As a business owner myself, planning for a transition at some point in the future requires that I plan and prepare today. I don’t have the crystal ball that predicts what will happen tomorrow, next month or next year, but I can prepare for the unexpected to secure my future and the future of my family.
We know the majority of business owners focus on running the business and don’t focus on building a transferable business in the future. We also know that most business owners don’t know where to start.
What should you be doing today to prepare for tomorrow?
Understand your current situation:
Have a valuation done on your business. Know your starting point.
Define your future state:
Meet with a financial planner to determine what number you need to support your “next chapter.”
Incorporate the value of your business in your financial plan.
Identify the gap between your current state and what you need for retirement.
Set your timeline and close the gap:
If you already have what you need to fulfill your retirement, you have options, as you are financially ready to exit at any time. Now you just need to make sure your business is ready and you are personally ready to exit.
If you have a gap, you need to define the financial gap and the timeline to close the gap.
To close the gap, your business is going to be the largest contributor.
Focus on building value as part of your strategy and culture.
Identify your exit options:
There are many options to exit, including intergenerational transfers, management buyouts, Employee Stock Ownership Plans (ESOP), sale to a third party, and recapitalization. Understand the options.
When I needed to navigate my parents’ health care, funeral planning, and estate settlement, I knew it was essential to utilize the experts and available resources that could best assist me in this process.
In the same way, navigating the planning and preparation for a business exit requires expert advice and resources to be successful.
As a business owner, we may know how to run our business, but many don’t know what it takes to build a salable business and eventually exit on our own terms. Engaging a team of resources to help you plan, prepare, and execute on an exit is just good business. You built your business based on a skill or talent. Engaging others who have the skill and talent to help you navigate these unfamiliar waters is no different than hiring a surgeon to do brain surgery when your family practitioner won’t do.
Plan, Prepare, Succeed!
Jayne McQuillan, CPA, MBA, Certified Exit Planning Advisor (CEPA) is the owner of Journey Consulting, LLC
Our firm is focused on providing business owners and their businesses with strategic planning, exit planning, financial expertise, and organizational improvement. We use a holistic approach within all of our services by aligning leadership with business strategy and outcomes.
Schedule your free consultation call today!