"Begin With The End In Mind”………Stephen Covey
There are several different courses you can take with your business based upon what your exit strategy is. For that reason, it is always good to have a clear idea of your strategy from the very beginning. Some questions you might ask yourself are, 1) is there someone in the family who wants to continue with the business once you retire? 2) Is this business for purposes of a steady income over a set period of years, or 3) is the business something you want to grow with the idea of a big payout once sold? The answers to these questions and more can determine how you conduct your business. Let’s face it if you are grooming it for a big payout at the end you will need to minimize the amount of cash you pull out; cash needed for reinvestment. On the other hand, if current lifestyle is your purpose, then maintaining a level of production that provides to you that lifestyle is all that is necessary until you one day either close the doors or sell at a lower value. There are no right answers to these questions, but it is a good idea to ponder them early.
The reason you need to determine your course early into the business’ existence is once a path is set it may be difficult to change. I recently had a conversation with a gentleman who desperately wants to sell his company because he wants to retire and no longer has anyone he trusts enough to run the operation. He asked me to review his overall business to get an idea of what potential buyers might think of it. The plan in his mind was to use the proceeds of the sale for his retirement. However, it was obvious that he was not running the company with that day in sight. In fact, he had for many years been maintaining a nice lifestyle at the expense of the company. His growth was sluggish, at best, due to restricted resources. This was fine, but it severely limited the “big payout” at the end. His only choice if he wanted to retire was to find someone who could run it, to help him maintain his lifestyle, or to not retire for several years and adjust the company’s path. Obviously, neither option made him very happy.