“Begin with the End in Mind”—Stephen Covey
Regarding your exit plan, there are several different goals from which to choose. You must have a clear idea of your strategy from the very beginning. Some questions you might ask yourself are:
1. Is there a family member who wants to continue with the business once I retire?
2. Do I want my business to provide a steady income over a set period of years?
3. Do I want to grow my business for a big payout when sold?
The answers to these questions and others will determine how you conduct your business. Let’s face it, if you are growing it for a big payout at the end, you will need to minimize the amount of cash you pull out, setting aside cash for reinvestment. On the other hand, if the current lifestyle is your purpose, then maintaining a level of production that provides that lifestyle to you 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 you need to ponder them early.
You need to determine your business goal early in your business’s existence because once you set a path, it may be difficult to change. I recently talked with a gentleman who desperately wants to sell his company. He wants to retire and has no one he trusts enough to run the operation. He asked me to review his business overall to get an idea of what potential buyers might think of it. The plan in his mind is to use the sale’s proceeds for his retirement. However, it was obvious that he was not running the company with that day in mind. For many years he had been maintaining a nice lifestyle at the company’s expense. His growth was sluggish, at best, due to restricted resources. This was fine, but it severely limited the “big payout” at the end. He had only two choices regarding his retirement: He needed to find someone who could run his company to help him maintain his lifestyle; or, he needed to postpone retirement for several years and adjust the company’s path. Obviously, neither option appealed to him.