3 Questions You Must Answer to Successfully Exit Your Business
In fact, if you follow the advice that I’ve been posting for more than 2 ½ years now, you’ll get there! Then all that transactional stuff will be necessary. But, let me summarize the critical aspects here so you know where to focus.
Being able to exit your business doesn’t just mean selling your business! It can actually take on several forms. You might pass it on to your family or employees. While in some way these options are also sales, they take on a whole different dynamic. In many ways this is even more difficult than an outright sale to another person or entity!
No matter what the transition, there are 3 critical questions you need to answer in getting there!
What Do You Want Financially?
This is not your business revenue. I am talking about how much money you want to generate on an annual basis to live the lifestyle you desire. While this seems obvious, you’d be surprised by how many people don’t know this number and even fewer how to get there!
Notice the highlighted word in the last paragraph – generate. We’re talking about financial planning here. While I’m not a financial planner this is a critical question I always ask as we begin business planning. It tell us how big we need to grow your business to achieve your financial goal!
Now, back to that word generate. It leads us to the next critical question…
How Do You Want to Generate Wealth?
To generate your lifestyle requires wealth. That is, sufficient assets to create a return on investment (ROI). There are a number of strategies you can employee to get there:
- Paper securities (stocks, bonds, mutual funds, etc.)
- Real Estate (buy and rent housing for others)
- Building a business to the self-sustainability stage
Again, I’m not a financial planner, but I do understand how each of these options works and have helped small business owners use each to achieve their financial goal.
There are a few problems with paper securities. First, is that their success are outside of your control. Additionally, you must save money to do buy the paper. What I have found is that most small business owners use their money to build their business. So, there is little left over to buy securities.
Real estate is a good option, but it almost requires that you get into the real estate business! To build your wealth in this manner means you need to run 2 different businesses! While a good option it can distract you from your primary business.
Finally, if you’ve already made the commitment to go into business, I think you’ve decided on a strategy. You just might not realize that you did!
Building a business is actually the fastest way to get there if you don’t already have a pile of cash. Because building a business allows you to create cash flow which gets you the cash you need to retire. Done right, you should be able to get there in 3 – 5 years. How’s 3 – 5 years to retirement sound to you!!!
Build a Business Strategy & Plan to Get There
With a target (your financial objective) and a decided strategy (build a self-sustaining business) you just need a plan to get there. This is exactly how our strategic planning framework is built. It walks you through all the steps necessary to focus your plan on your personal goal.
To give you an idea of the power of this approach, let’s look at an example. A client I worked with had been operating for about 10 – 15 years. They had built a number of different businesses all related and somewhat successful. The problem was the relationships between the businesses were tactical and not really strategically focused.
We applied the process described here to determine exactly how big the businesses (assets) needed to be built to achieve the financial goal. Then we build a 3 year business plan to get there.
Interesting thing happened. Now that the owners understood exactly what they were focused on they knew exactly what opportunities to look for. Within 18 months all the work was completed and sufficient assets were in place to generate the cash flow required for financial independence.
So, we next began looking for the first critical hire for the operation so the owner could step away. But, I’ll save that story for another day!
Answer the Questions to Successfully Exit Your Business
So, now that you understand what needs to be done, you can get started. I am here to tell you that that the plan is easy. The part most owners struggle with is determining what they really want and how to go about getting it.
If you find yourself in this position I would suggest using our Personal and Business Goal Assessment tool. If you want a little more personal attention shoot me an email. I would be honored to assist you in figuring out how to use your business to become financially independent!