Business owners, where do you want to be in five years? You’ve heard that question asked any number of times. The answer to that question is intentionally a bit vague, but gives some indication of a plan, a goal or a dream.
However, in terms of exit planning for a business, five years is the standard answer. The reason for this is that most business owners know they can’t leave their businesses right now. They assume that whatever needs to be done with the business to make it sellable – providing training to key employees, developing a succession plan, creating a workable exit plan, finding a suitable buyer, etc. – can be accomplished over the next five years.
The problem with this thought process is that owners often have no idea what they need to do with their businesses to allow for an exit on their terms. Should they concentrate on asset diversification? Is building value within the company the main focus? Or should the owner concentrate on building a competent management team to take over the business when he or she exits? Or maybe it should be a combination of all the above.
There is a reason that very few businesses are ever sold or successfully moved to the next generation of mangers. That’s because business owners typically can’t or won’t take the time to work on their businesses – putting their companies in a position that allows them to transfer ownership in a manner where a successor would be willing to take over the business.
Those involved in business exit planning, whether they are advisors or business owners, often do not understand what it takes to successfully leave a business. Oftentimes, subsequent owners are really not interested in the knowledge or abilities of current owners who want to sell—instead, they are interested in a business that is producing cash flow. It is predictable cash flows that give a business its value, and that’s what prospective owners want – a sure thing!
If a business owner’s main asset is supposed to get him or her to exit the business and that asset is the business, both advisors and business owners need to find ways of creating an entity that has predictable and regular cash flows. Without this type of exit planning, business owners will always answer “five years from now” when asked where they want to be and will never be able to exit their business when they want or how they want.
If you own a business, and you’d like to exit it on your own terms financially and timely, we recommend that you meet with your business advisors now to get started. This type of planning is critical to a successful business exit.
Need an advisory team? Contact Synergetic Finance today. We can help you put together a trusted team of experts to advise you and your business. It is never too soon to start planning for the future!
To your success,
Joe Maas, CFA, AVA, CFP®, ChFC, CLU®, MSFS, CCIM
President of Synergetic Finance
