The Pulse’s Liam Shorte gives some tips to pass on to your clients about how to plan to exit their small business.
One client asked me when she should start planning her exit from her business and was a bit shocked when I said from the day she started up. I am a firm believer in always having an exit strategy, as you never know what life will throw at you. I have seen illness, premature deaths, divorce and changes to the economy or specific industries force people’s hands earlier than expected.
A tsunami of retirement
We are just about to see a veritable “tsunami” of business owners seeking a way out of their businesses as baby boomers hit 65 over the next 15 years. So if you’re not one of those without a plan in place, then you may be one of the sad majorities that fails to sell off the business and sees retirement dreams fade quickly. Many Aussie small to medium business owners see their business as their superannuation. Well then, like any other investment, you have to know how to liquidate your investment when needed.
While a business owner may look forward with pride to the possibility of unlocking the value in their business as they sell or transfer it to family, all too often we see them stuck in a rut until events force them to sell or poor performance shuts them down. Whether it is transition planning or selling the business, not knowing where to start is common. It is sometimes easier not to do anything. Here are a few common excuses people have given me over the years for not planning their exit strategy:
- No one else has the ability to keep this business going like we can.
- We can’t afford to retire because we don’t have enough money saved.
- I’m waiting to be sure my children are ready to manage the business.
What I have seen within those businesses that do well is that there is a good leader, often with the help of their accountant or a specialist, who openly communicates a shared vision for the future with the staff and family members with a view to instil trust, common purpose and shared values. They make it clear that the shared vision will include their exit at some stage, and they put in place solid business succession planning for the new owners, staff and family members so that all know clearly where they stand.
The one key to success above all is that they are proactive, rather than reactive, and they begin the succession process many years before there is an actual event to trigger the exit. They look not only at their exit but how the buyer or family will fund the takeover. It is important to encourage open, honest communication and participation in the process, as it’s vital to the success of both the family and the business.
The full article was originally published at The Pulse.