Small Business Owners, What's Your Exit Strategy?

When I ask small business owners or professionals the question, "What's your exit strategy from your business at retirement?," they rarely have an answer. The most common response is that they haven't given it much thought. That's a big mistake.

As a small business CEO, your job is to develop your business into an asset that can be sold in the future for top dollar. In order to do that you need to look at the big picture and begin with the end in mind.

For your business to be truly saleable, it needs to function without you. Too many small business owners make the mistake of not scaling their business to a size that allows them to virtually delegate every task so that the hands-on, day-to-day workload is performed completely by employees rather than themselves. That ultimately includes hiring a general manager to manage the business.

I'm regularly told by business owners, "I don't want to grow my business any larger."  What it comes down to for those people is this - they are already over-worked and they believe that growth means more hours, more risk, more people headaches, and for what? More gross revenue with little or no more profit? If you are a small business owner or professional and your business won't run without you for more than a couple of weeks, let me challenge you. At this point you don't own a business, you own a job. You don't have to know how to take your business to the next level, you just have to want to grow and then start assembling the team to help you do it. Beyond making the decision to grow your business, the first step in the process is to become a small business CEO rather than a small business owner/manager. In truth, you need to become both.

None of this happens overnight. It's a process of developing a vision, strategic planning and recruiting and developing people. This will likely take years. The payoff is big if you get it right. It's not easy, as a matter of fact it can be very difficult. That's why most business owners and professionals don't do it. I'll let you in on the secret, "don't try to do it alone." Assemble a team of service providers and professionals to come along side of you and to work with you in the areas of your business that you need or want help with.   

There are lots of business owners and professionals who are doing exactly what I've laid out before you in this article.  That general manager that I spoke of earlier is typically developed from within as part of a strategic transition plan and served under the business owner as the assistant manager until they proved themselves by personally driving business growth to a predetermined objective at which point they were promoted to the position of general manager. As general manager the next step is for them to purchase the business at the owners retirement. How will they pay for it? It's all part of the plan.

What role do you want your business to play in your retirement plan? Are you willing to make an investment of time and resources over the next several years in order to develop your business into an asset that can be sold through a transition plan for a significant sum of money? You can't coast your way to success, you have to put your foot on the gas and push the pedal... Enjoy the ride!

The Stakeholders In Your Business

As a business owner or professional, you're in charge, you're the boss. When you interview prospective employees, two of the things you're undoubtedly looking for is loyalty to the company and commitment to the job. Turnover is costly, and the last thing you want is to put time and effort into developing someone to become proficient in their position only to have them leave a few months or years later.

I've always said that the ability to look at things from both sides of an issue is what makes a good leader. That being said, lets take a look at both sides of this important question. What would happen to your business and the lives of your employees and your customers if you died in a traffic accident on your way home from work today?  Could the company survive your death?  Would your employees still have a job and a paycheck to support their households?  Lets now look at this issue from an employee's point of view. Just as we don't want to lose an employee, our employees don't want to lose their job and have to start all over somewhere else.  Employees want to find a company to work for that values them and looks out for them. If they don't feel that they have job security where they are, they may start looking for something that offers more security. This is especially true with key employees. Both employers and employees are typically looking for a common denominator when it comes to security and longevity. This common goal creates a real opportunity for the proactive business owner/professional.

We're clearly talking about the need for business continuity & succession planning. The smaller the company or professional practice is, the more vulnerable the company is to the loss of a key employee or owner. Most business owners that I talk with on this topic have a complete misunderstanding of the real issues at stake and the opportunities and benefits that can come from business succession and transition planning.

I'm frequently told by business owners "I have that all taken care of." Really, I say, that's great to hear, can you tell me about that. "Sure, I have a big life insurance policy, so if I die my family will be well taken care of."  What about your stakeholders beyond just your immediate family? "What stakeholders?" Your employees to start with. "What about them." Well, will the company survive your death? Will your employees still have a job, and if so, for how long? Once you're gone, will the employees stick around to see if the company can make it, or will they begin to look for new jobs right away? What do you think the chances of survival are for the company if the employees start leaving? I'm not saying that the life insurance policy isn't important for your family, but lets not get confused into thinking your succession plan is "all set."  What if you get critically hurt or sick? What if it's your spouse or child who is critically hurt or sick? What role do you want your business to play in your retirement? Do you know what your business is worth?

To truly develop a solid succession and transition plan involves layers of underlying planning. It involves identifying and developing key people within the company. It involves business owners learning how to create leverage by strategically growing the business and delegating important tasks and responsibility. It's about building a successful company and creating an exit strategy.

Who are the real stakeholders in your business? You and your family, your partner(s) and their families, your employees, your customers, your suppliers and service providers, and your business entity itself. Focus on taking good care of your stakeholders by really digging in and working on the continued growth and success of your business, don't get caught up like so many business owners do, by just working in their business.

This is a topic with layers of issues to be covered. Follow me as I continue the discussion in upcoming posts.