The first time small business owners exit from their business will be the last time they get to do it right. There are five surprises that await small business owners who are exiting and planning their EndGame, a stage on RCC’s Growth Path. When you are exiting and in the EndGame stage, you want to avoid these 5 surprises:
- You didn’t realize that you must grow the business significantly to sell it at the price you hoped.
- It is taking a lot longer for your successor to step into your position.
- Your first Exit Plan (A) will be replaced by Exit Plan B, but you don’t have Exit Plan B.
- You cannot exit the year you planned.
- You didn’t know you would want to work differently as your exit time gets closer.
It is unsettling to consider exiting your business without having to think that there are blind spots – unanticipated business hurdles – to overcome. At first, many small business owners deal with the ambivalence of letting go of their company, their baby. Some small business owners will prolong the separation, others will have someone or something that will get them to overcome inertia. For instance,
- if you are a solopreneur, you may devise a way to work less hours and still make the same income, or settle for less.
- if a spouse is waiting for you to retire, this could be the incentive to climb off the fence.
- potential successors who are working in your small business may be hinting about succession.
- an unexpected offer to buy your company may alert you that you have something of value; having a buyer on your doorstep will surely get your selling wheels turning.
No matter what urges you towards exiting your business, your next step will be to implement your exit plan (hopefully, you have one), or create an exit plan and begin to execute it. At Rita Coco Consulting, we start our exiting clients with an EndGame and then prepare a strategic Goal Plan.
When you decide to exit, you haven’t entered the Twilight Zone,
but you have opened the door to unchartered territory and the surprises that await.
The 5 exit surprises do not occur in any order, or separately; neither do they happen all together – whew! Let’s look at some scenarios to see how these unexpected events occur.
Dissolving a Small Business: Larry, a sales consultant, has decided to close his business in 5 years. He discussed his option to sell with business experts, but dissolution was the best option. Since Larry is not receiving money for his business, he may need to grow his business to feed his retirement fund. That may not be a surprise to Larry, but what may be a surprise:
- How much revenue Larry needs to generate before his EndGame year – the last year he is in business. He is surprised that he needs to grow significantly.
- Larry wants to work less each year while generating more gross revenue and profits. He attempted to do this on his own, but he seems to be working more!
- Larry wants to scale down some services, and deliver only the ones he loves to do. RCC believes that Larry should have the freedom to choose the relationship he want with his business, and that includes choosing where he spends his time. We call the Freedom to Choose, True Business Ownership. It is not happening, yet, as Larry has been so focused on delivering all his services, his mind has not made the shift to sell only the ones he loves.
Transiting a Small Business to a Successor: Joan is an architect and business owner who wants to exit the business in 3 years. Her daughter Lila, who is also an architect, will take over. Joan and Lila have been talking about the transition for several years – ever since Lila completed her graduate degree. Even though mother and daughter have discussed succession, there are exit surprises appearing and becoming hurdles:
- Lila is worried. Her Mom is busy with clients and growing the commercial side of the business; there is little time for Lila to learn from her Mom. Joan has not made a succession plan for Lila, what RCC calls a 4W (who, what, when, why) map, that allows Lila to become self-directed in these last years of training.
- Secretly, Joan is worried too. Lila seems to shy away from the non-billable work which owners must do; she gets more excited doing architectural renderings.
- Joan realizes that there is no real exit Goal Pan – an EndGame strategy for passing the torch to Lila.
- Joan also decided early on that she wanted to build the commercial accounts and leave it running well for Lila. There is good/bad news by making this decision. The good news – Joan is doing commercial work which she loves. Bad news – the commercial work is all on-site with a major amount of travel. Joan was not expecting to be away from the office in her last 3 years. There is no delegation plan in place to help Joan plan her time and location so that she is available to Lila, while growing this division.
- Joan may not leave by her target date unless she can remedy the issues plaguing her exit.
Sell a Small Business: Greg is a mason who would like to exit in 4 years. He has several employees who he has groomed over the years. He hopes one of them will buy the business from him. A few surprises that await Greg:
- When asked, none of the employees want to buy or take over Greg’s business.
- Being smart, Greg hired a consultant to complete a business valuation. Greg was shocked to learn that his business is not what he thought it was worth.
- Greg’s Exit Plan A was to sell a $2M company to his employees. Now he needs a Plan B if he wants to exit in 4 years.
- Greg needs to find a buyer – that was not in his plans.
Although these are hypothetical cases, many of these situations are common. They have happened to Rita Coco Consulting prospects who have called on us to help. RCC has the services and tools: EndGame, 4W, TBO Delegation Plan and Goal Planning to strategically plan a successful exit.
In March 2019, Rita facilitated the workshop, Exiting: How to Win Big at Your EndGame. Not surprisingly, business owners and successors who attended craved specific details on time, transitioning, and planning.
Rita welcomes Exiting and EndGame questions.
With respect and gratitude,
Rita
