As a Business Owner who is over 50 years old, you have likely been asked by your spouse: “When are you going to sell the business?”
You then reply: “When we’ve got it ready to sell.”
Your spouse then persists: “When will it be ready?”
You then say: “In a couple more years. We have to get sales back on track after a recent setback.”
Your spouse sighs, frowns and says nothing, knowing that you said a similar thing a few years ago and nothing has changed. This is not the way they envisioned their retirement to go.
Some variation of this conversation is taking place in every town across the country. Unfortunately, it’s a lot easier to start a business than it is to sell it.
There are so many factors at play, and many of them are out of our control:
• Interest rates
• The economy
• The health of your industry
• The rate of inflation
• Tax rates
• The stock market
• Interest and availability of foreign buyers
• Availability of financing
All these factors can have a huge impact on the timing and value of a business sale.
Then there are factors that you can control, but they take time and a deliberate plan to nail down:
• The quality, quantity and duration of your client contracts
• Revenue and year-over-year increases
• Profit percentage and total annual profits
• Bench strength of your employees
• Quality of your leadership team
• Bench strength of your advisory team
• The documented processes, policies and procedures
• The shape of your financials
• Track record of your business
• The story you can tell about the future
• When you want to sell
• How many buyers are interested
There are other factors to consider too:
• What do we tell our employees, and when should we inform them that we’d like to sell the business?
• Who can we trust to broker the deal? What will that cost us?
• Will we be able to sell the business for as much as we need for our retirement?
• What will we do with ourselves if we don’t have the business to run?
• If we put our energies into finding a buyer, will the business suffer when we take our eye off the ball?
• How much passive income do we really need to retire? Could we keep the business going and just take more time off?
The questions could go on and on. But how do we deal with all them and still try to answer our spouse’s simple query: “When will you sell the business?” While you and the business have been good family providers over the years, your spouse’s fears that circumstances can change quickly and a profitable business can just as easily lose money. Both of you know that many companies go bankrupt and neither of you want to end up owing money to creditors. Especially when your spouse is retired.
While it’s difficult to predict the value you can expect when you sell the business, like any exercise in goal-setting you have to look into the future, draw a line in the sand, make a commitment and begin moving determinedly toward that goal. Without setting a date, developing a plan of action and committing to make it happen, anything you tell your spouse will be a wishy-washy dream that will never get off the ground.
So let’s get started. First, articulate the goal:
Your goal might be something like this: “We have turned our business structure into an Employee Share Ownership Plan (ESOP) and transferred ownership to our employees so they can carry on the business successfully. I have most of my capital out of the business and invested in a diverse portfolio. I can be relieved of my duties but still receive anincome as the chairman. Deadline: May 1, 2018.”
Next, you’ll want to list the benefits of making this happen. This becomes your motivation: the reasons you strive to reach this goal. Not the least of which is the preservation of your marriage.
Don’t forget to list the obstacles that could get in your way: employees resistance to change, your own habits and lifestyle, all the items on a Due Diligence Checklist that are still to be done, low profit margins, etc.
Once you know what the issues are, develop a list of actions that you need to take in order to deal with them, with deadlines for each. For example:
1 Get a Due Diligence Checklist and begin to prioritize each item. – June 24
2 Talk with my spouse. Make a commitment. – June 27
3 Take the Sellability Score to find out how saleable the business is. – June 29
4 Get a Business Assessment done to know what needs to be done to increase the value of the business and what “red flags” it has that could prevent it from selling at all. – July 6
5 Develop a strategy for increasing our sales and our margins. – July 13
6 Meet with a financial advisor to clarify my retirement needs and how best to meet them. – Aug. 4
7 Find a group of Business Owners that are focused on preparing for their transition out of their businesses that I could meet with regularly, discussing the process to transition out. – Aug. 17
8 Get a business transition coach who can help me stay on track and navigate through this jungle. – Sept. 7
Once you have documented the goal, set a deadline, brainstormed the benefits and challenges and listed the actions with timelines, there’s one more step. Looking at everything you’ve written, knowing the rewards and the price you’ll need to pay to get them and ask yourself if it’s worth it.
If yes, then make a commitment. Consciously decide that you’ll do whatever it takes.
At that point, you’ll be ready to give your spouse an answer to their question.
Profitable Wisdom & Wayne Vanwyck © 2015