Getting into business can be relatively easy. What about getting out?
That can be a little more complicated.
As Baby Boomers age and start seriously considering retirement more and more articles are being published on retiring from small business. So far, all of those I’ve read focus on the financial aspects of retirement planning relevant to small business owners. The financial picture is where you have to start. You need to ask questions like
- What kind of life do you want to have when you retire?
- What will that cost?
- How old will you be when you retire?
- How long do you expect to live?
These questions lead to a number, namely the amount of money you need to have to retire to the kind of lifestyle you want.
For an employee, the rest is simple. Have enough money, decide when you want to retire, tell your boss you’re retiring, ride off into the sunset.
It’s more complicated for a business person, particularly someone who has built up a business of any size that has a staff and relationships with customers and vendors. The business person has three options when it comes to exiting the business:
- Shut it down and walk away.
- Hand it down to a family member.
- Sell it.
The first option might be the only option if the business has few assets and is completely dependent on the owner’s knowledge or unique skill set.
If you want to hand your business down to a family member or sell it there are some more questions you need to answer, which will help you determine whether or not your business is ready for you to retire:
- Have I written up and passed on everything I know about this business in such a way that the new owner could successfully use the information to operate the business?
- Are there adequate systems in place to accommodate continued growth of the business for the foreseeable future?
- How long could the business continue to function well and turn a profit without me being there every day?
If the answers to the first two questions are yes and the answer to the third is something along the lines of “several years” or more, your business is ready for you to retire. If not, it isn’t.
The truth is that it will be difficult to find buyers for your business if it won’t run well without you. The new owners would have a higher chance of failing after they take it over. The same holds true for family members who would be taking over your business. You’d want them to be successful, right?
How do you exit your business?
- Implement adequate organization and systems and issue those as policy in writing as well as in visual form (such as photos and/or video).
- Hire the people you can trust. Character is far more important than skills. You can always train people on skills. The costs of hiring untrustworthy, dishonest people can be extremely high.
- Train those people on your way of doing things in your business. Just because someone has a degree in something or experience working in the same industry, doesn’t mean they know how you do things in your company. They need to do things the way your company does them, period.
- Monitor results. You need to measure individual production and overall company performance. There are specific techniques for managing by statistics which ensure success if used properly.
These will ensure you’re able to exit your business and that the new owner can operate it successfully after you leave.
Contact us for a free consultation concerning your exit strategy for your business.