Let’s stress again the importance of having an exit strategy. We discussed the two most important bridges for a business owner to cross: the decision to treat your business as an investment and an understanding that the business can be transformed into an attractive product for the right new owner. This segment will help you discover how to cross the first of those bridges while keeping your end game in mind.
Let’s consider how you can begin treating your business as an investment. In the beginning, it was your personal objectives that drove you to the decision to run a business. Your personal goals change over time, and these new goals will drive your choice to sell, as well as the timing as to when you opt to sell the business. Remember, your business is part of your personal wealth management. When you are looking to your future, both as an individual and as a business owner, you should consider the business as a source of income as well as an asset. So how do you do this?
First of all, don’t wait until you are ready to retire or sell to know what your business is worth. The value of the business to you not only includes the income it brings, it includes your sense of achievement, a worthy use of your time, and the unrealized opportunity for continued growth and its salable value, as well. However, it also has business and personal risk, and responsibilities that take away from that value.
So, first things first! Realize that owning a business is your investment decision. Ask yourself, “Does my business have enough value to a buyer to pay me out and provide me with money for retirement or my next venture?” To get the answer, you will need to have an idea of the market value of the business and a financial plan for the next phase of your life. These professional services will cost you some money and are the only way you can have a real and certain foundation for your plans. A business broker, financial planner, CPA or an attorney may be able to help you get started.
When you exit your business, you should plan to get your 1) time back and 2) money out. This gives you a couple of options. You could sell your business and continue to work in it; own it and have others do all the work, or get away and enjoy life. In his book “Job,” Robert Heinlein noted, “The supreme irony of life is that hardly anyone gets out of it alive.” So plan for what you want, whether it is time, money or both, and take the necessary steps to achieve your goals.
Lastly, and this may hurt, if you can bridge the gap between what you can get from your business and what you personally need, you owe it to yourself to take action to get results from your business plan. If you cannot bridge that gap, you must reset your expectations.
Now that you have discovered how to treat your business as an investment, practice what you have learned, and you’ll be ready to work on packaging your business for the preferred buyer, which will be the focus of our next segment. Until then, remember that your business is more than just a place to work, it is a personal asset, too.
