A Modern-Day Fairy Tale - Succession Planning
Once upon a time in a faraway land, there lived a hardworking business owner. He sweated and toiled for much of his adult life, sacrificing many long hours and lost weekends to build a small but modestly profitable business. Over time, the business grew to a significant value. he knew he should plan for the eventual sale of his business, but he never quite seemed to get around to doing it.
He also had a feeling in the pit of his stomach that perhaps there was more to life than 70-hour work weeks and non-stop decisions. But every time he thought about doing something about these issues, the incessant demands of running the business always got in the way.
Then one day, a knight in shining armour came along and offered the business owner twice what the company was actually worth. After a minimal amount of negotiations, the knight bought the business outright, paying a princely sum in cold, hard cash. The hardworking business owner took the money, sailed away to the Cayman Islands on his brand-new yacht and spent the rest of his days golfing, lazing in the sun and enjoying his new-found wealth.
A "happily-ever-after" story? Of course. The chances of it happening to you? About as good as winning X-lotto. Yet, far too many business owners cling to a misguided belief that a knight in shining armour will one day appear out of the blue and make them an offer they can't refuse. Worse, for many of these owners, this modern-day fairy tale represents the full extent of their exit planning. Like our mythical owner, they get so wrapped up in the day-to-day details of running the business that they never take time to plan for their future. And when their heroic knight fails to come galloping up on his trusty steed, they usually end up receiving far less for their business -- their largest and most important financial asset -- than they deserve.
When you decide to move on to greener pastures, that transition involves more than just exiting the business. You're also leaving a way of life and, more important, a deeply entrenched way of thinking about who you are and how you relate to the world around you. Accordingly, exiting the business involves a lot more than deciding whom to sell the business to and for how much.
Equally important are your choices regarding what to do with the rest of your life. In the absence of 60- to 70-hour work weeks, how do you intend to fill the time? What will provide the same personal satisfaction and self-esteem that your business used to? How can you use your accumulated knowledge, wisdom and experience to continue making a difference in your community? With proper attention to these and other critical questions, you can lead a richly rewarding life beyond the business.
Exiting on Your Own Terms
The secret to a successful transition out of the business lies in one simple equation: EP + LP = WBB. Exit planning plus life planning equals winning beyond business.
When you plan when, where and how to leave the business (rather than just letting it happen as many business owners do) and when you make conscious, purposeful choices about your new direction in life, you end up with an infinitely more rewarding outcome than if you did nothing at all. Not only does "EP + LP =WBB" permit you to exit the business on your own terms, it lays the foundation for a life every bit as vital, fulfilling and rewarding (possibly more so) than the one left behind.
The first half of the equation (exit planning) encompasses four fundamental activities:
- Determining when, where and how you will leave the business
- Maximizing the value of the business
- Identifying your successor (if you decide to transfer rather than sell the business)
- Estate planning to protect your assets and transfer wealth with a minimum of taxes
The second half of the equation (life planning), say our experts, also involves four essential tasks:
- Discovering who and what you are beyond the business
- Identifying your true passions and "callings"
- Finding new ways to achieve the sense of fulfilment your business currently provides
- Setting a course for the second half of life
Why do Succession Planning?
When done properly, it enables you to:
- Plan for an orderly transition of the business (as opposed to a panic event)
- Identify and prepare a capable successor
- Build, protect and transfer your net worth
Unfortunately, many business owners neglect succession planning. They don't get it done (or they don't keep it current) for many different reasons, the main one being that the highest and best use of their time involves running a company and making a profit, not moving the succession planning process along. Without this critical piece in place, however, the whole tower of blocks can come crumbling down when the time comes to move on.
Contact us to make an appointment to find out how we can help you.