Stressful economic times often cause business owners to put their head in the sand with try to withstand the storm.
It’s hard to pivot when you can’t see what’s coming. It’s even harder to effect change when you won’t look up. For giant companies, change is the enemy, but small businesses are uniquely prepared to take on the challenge and change and adapt when the time calls for it. In these uncertain times, it can feel particularly challenging for business owners to plan the future, especially when it feels like we’re running on “what if’s” on a daily basis. The truth is that we as business owners can continue to accept this chaos and let the chaos run us, or business owners can hunker down, decide to accept that change is inevitable, and plan out the future.
The first step of understanding where the company can go is taking an accurate assessment of where things stand now.
Now is not the time to defend past actions, and past mistakes. This is the time to take inventory of the past, and make the conscious decision to do better, to put plans in place and follow through. This is the time to re-imagine your business and set goals to ensure a profitable future.
Now is the time to plan for exit, whether exit is 3 years down the road or 20 years down the road.
Now is the time to build your exit plan on your terms. I know it sounds crazy – we’re in the middle of a health pandemic, an economic crisis, businesses are shut down. I’m sure a lot of business owners are thinking – what if I just shut my doors tomorrow. Let’s be honest with ourselves – running a small business isn’t easy, if it was easy – everyone would do it, and everyone would be successful at it.
Small business isn’t about building gazelles – sure that is the goal of some entrepreneurs.
But small business is about building sustainable and profitable machines that contribute to the local economy, and ultimately to the national economy. privately-held businesses employ millions of people, they feed families, they support each other, they build communities.
Let’s look at some SMB exit statistics – the plan vs the reality when it comes to exit planning:
Here’s what business owners plan for their exit: 50% plan to pass their business on to family members; 10% plan to sell to a competitor; 30% plan to sell to employees; 10% plan to sell to outsiders
Now let’s look at the reality – 15% pass the company to the 2nd generation; only 5% of businesses go from 2nd to 3rd generation; 10% sold to competitors; 5% sell to employees; 10% sell to outsiders; 40% close their doors / liquidate; which leaves 20% of businesses unaccounted for.
75% of business owners who exit say they wish they had done it differently. Only 2% of business owners know the value of their own business – their largest asset when it comes to exit planning.
So how do we solve that? And why don’t more business owners get valuations done for their business? It’s the elephant in the room that no one wants to talk about. What if my businesses isn’t worth what I think it is? What if all this sweat equity I have put in over the years doesn’t add up to real measurable value? It can be scary to think about that.
The only way to know for sure, and to change the outcomes for your business is to get started, one foot in front of the other – you can do this. Being an entrepreneur means taking on the challenges that no one else will and building solutions.
Interested in building your exit plan, but unsure where to begin? We all need a little help sometimes. Talk to us we’re here to help business owners, our clients are business owners just like you.