Where do you want to be in 10 years?
This is a question I asked a business owner, James, recently.
James has owned a very successful business for over 25 years and starts and ends everyday thinking of the business and what he needs to do to keep it successful. When I asked him where he saw himself 10 years from now, he was immediately stumped. His response to me was, he really hadn’t thought about it. He was just expecting to continue doing what he’d been doing – running the business. But when pressed, he admitted there would be some kind of transition out there in the future; but he just hadn’t put any real thought into it. So, what to do about this?
Immediately, there are four objectives for James:
- Consider that there really is a future transition event for him and the business.
- Determine an accurate value of the company as it is now.
- Determine what that value needs to be to support James’ retirement or what I like to call his next act.
- What can be done now to begin increasing the value of the company to meet objective three?
Let’s take these one at a time:
Is there really a future transition event? Understand that there really is a future transition. Pretty obvious but just because it’s obvious, it doesn’t mean we’ve developed a plan for it. Let’s be plain spoken here. You will exit your business one of two ways. Either horizontally, or vertically. It’s best that you do it and plan on it vertically.
Determine an accurate value of the company. There are a couple of ways to do this. One is to engage a formal valuation company who will do a review of your company and the market and derive a fair value of your company as it is viewed through similar companies and transactions in recent history. A second way to do this is through a less formal but still in-depth analysis and assessment of the business utilizing a business consultant experienced at growth and strategic planning.
Determine what that value needs to be. What do you need out of the company in order to fund your next act? This is going to take some real personal reflection and planning. It will include collaboration with your spouse and all the other important influencers in your life.
What can be done now? Start now increasing the value of the company? The first thing to do is to change your paradigm from owner/operator to buyer. Step back from your position as the owner and take a look at your business the way a buyer would look at it. What would the buyer see as valuable and worth buying? What would he see as not worth buying? What would he have to invest in immediately to make his investment worth-while?
You’re at a crossroads. Continue on in the direction that you’ve been driving. Or begin looking at your business differently and begin to develop the strategies and tactics that will increase the value of your company so when you reach the major destination of your transition, you’ll be able to afford all the things you’ve always dreamed of.
Call us and let us help you with these next steps. Also, here’s a link to a great short article in Entrepreneur Magazine: entrepreneur – preparing to sell about this topic. See what you think. I look forward to hearing from you.