If you want to get somewhere, start at the destination, and work backwards. Nowhere is this more true than in business succession/exit planning.
If you are of the boomer generation, think back to when you started your company. It was exciting, scary and, at times, a bit (or maybe very) crazy. I’ll bet that the only thing on your mind was: “Can I survive long enough to make a profit?” Likewise, I’ll bet one question that never crossed your mind was: “How can I build a company that I can someday sell for a huge amount of money?”
Now, years have gone by and you probably still ask yourself: “How can I make this business more profitable?” instead of spending time making your business more attractive to a buyer.
It is likely that you are making two common critical errors of privately held business owners:
You don’t see the speed at which a desire to exit will arise; and
You assume that profitability = salability. It doesn’t.
The need/desire to exit arises fast and without warning.
Most boomer generation business owners give inadequate attention to exit/succession planning until it is way too late. Then something happens that they should have but did not expect. A family member gets ill, a grandchild is born and you want to move closer, you want to live in a different climate, you don’t want to work as hard, or [you fill in one of hundreds of reasons]. It happens, and it happens quickly. In order to be ready for exit/succession, you need to prepare your company to be an attractive candidate to a buyer.
To get that second big payday takes a strategy executed well in advance of exit. Part of that strategy involves starting to see your company through the eyes of the buyer. What buyers think is value is often very different than what you would expect. In my upcoming blog post, I will focus on what buyers really buy so that you can understand how to make your company attractive to a buyer. In the meantime, if you would like more information on business succession planning or would like to discuss any of these issues with Burr & Forman’s Business Planning and Succession team members, feel free to give us a call.