To Exit Plan, or Not To Exit Plan, That is The Question

All the experts recommend getting an early start on an exit plan for your business, preferably at least 3-5 years’ work prepping the business (and yourself) for that eventual process of selling.  The idea is smart and easily understood.  The better you’ve prepared, the greater the likelihood that the business will fetch a premium price.  Who doesn’t want that?  It’s the right thing to do.

However, in my experience, the right thing to do sometimes clashes with reality and the practical nature of day-to-day business.  Let’s look at some very real obstacles that often prevent business owners from working on their exit plan.

• Too busy.  Exit planning can take a little extra effort, and many small business owners already feel like they are working more than they should.  Who has the energy to spend the next 3-5 years working on “extra” stuff, especially when it is not clear what the “extra stuff” will involve?
• Don’t want to spend the money.  Many small businesses struggle to make enough money to support the owner’s family.  That doesn’t mean their business has no value, but it does impede their desire to spend money on the kind of expert advice that can help them achieve a handsome return on their investment at time of sale.
• Afraid employees and customers may get the wrong impression.  There is a pervasive fear about telling others that you are thinking about selling your business.  It is based on the idea that employees or customers will leave, thus devaluing the business asset.  Though often unfounded, this need for confidentiality usually ends up causing paralysis in moving forward.
• Not sure who would buy the business.  Or put another way, owners sometimes can’t imagine who would want it!  That feeling can turn into a self-fulfilling prophecy because the attitude is easily discerned by potential interested buyers, who may interpret the attitude as lack of confidence in the future of the firm.
• Not sure who to trust.  Although there are lots of “experts” willing to provide advice, have they really helped others through a business sales process?  No one likes the idea of spending professional fees for weak services, but how do you know if they are weak or strong until the service is complete?
• No clear plan of when they want to retire.  Many “maturing” business owners feel like they can keep going indefinitely, even though there’s no evidence in human history of anyone actually doing that!  As a result, we tend to procrastinate.
• Not sure what the business is worth.  Having little idea of the worth of the business can also cause paralysis.  We may think it’s worth more than it is, and don’t want to learn otherwise.  Or we may think it is not worth much at all, and opt to wait for the magic combination of factors that will make it more valuable.

What often happens because of some or all of the reasons above, is that owners procrastinate until they wake up one day and decide that it’s time to sell…. Now!  It’s for that reason that I wrote “Final Act Of Ownership”.  Although it’s preferable to use an exit planning period to pump greater value into the business, sometimes time just runs out, and owners have to do the best they can with what they have.  Even in the sales process itself, there are ways to help a business position itself for a strong sales value.  The more you know as an owner of a “ready-to-sell” business, the better chance you have of success.  And even then, the sales process can still take a year or two in many cases.

Learn what you can about selling your business, and you might even be motivated to start earlier on that exit plan!  You can order “Final Act Of Ownership” at www.amazon.com/author/jerrybaltus.

Making, Fixing or Providing Is Not Leadership.

There are a great many traps that small business owners fall into, and the reason that they are actually traps is because they are completely unexpected.

When business owners start their businesses, they are usually doing it because they love what they do or they have skills or expertise that they can bring to the business. They go into a business where they can leverage those things.

One of the traps they fall into is failing to understand that knowing how to do the work of a business is not the same as running a business that does that work. They come into the business believing that their skill, know-how, and experience are going to wow the market and take care of the most fundamental elements of the business like sales and marketing only to find out that the job of business ownership is always sales and marketing. Unless a business has customers and clients, there is no business, no matter how good an owner is at delivering their product or service.

The biggest trap that business owners fall into is probably failing to understand the fact that knowing how to do the work of a business is not the same as running a business that does this work.

Why You Can't Lead the Way You Used To

Some great perspective on Leadership was written by Justin Foster in a recent blog post at www.ttisuccessinsights.com titled “Modern Business Requires Leaders to Connect with People at Emotional Level”.  Here is an excerpt:

The role of a leader has shifted from moving the numbers to moving the people. While financial and operational acumen are certainly valuable executive traits, modern business requires leaders who can connect with people at an emotional level.

The role of leaders throughout history has always evolved based on circumstances.

In the 19th and 20th centuries, the role of leaders in business was largely influenced by the Industrial Revolution, which produced leaders who could "manage the machines." These leaders understood how to maximize productivity and profits — unfortunately, often at the expense of people.

This 20th century "cubicle farm" thinking is still pervasive in large corporations, as evidenced by data showing an alarmingly high number of employees who feel disengaged at work (67 percent according to a 2013 Gallup survey).

The massive influx of Millennials into the workforce — and now into leadership roles — is forcing senior leaders to shift from being machine-centric organizations to people-centric. This required a massive change in how employees are viewed.

It first started in compensation plans and workplace environments, but is now starting to slowly permeate how new leaders are identified and developed. 

Rather than focus solely on operational and financial skills, senior leaders are recognizing the No. 1 role of a modern leader is to inspire people.

In my past role of leading a heavy-asset-based manufacturer, this shift was apparent in many conversations with the retired patriarch of the family-owned business.  His clear paradigm was that the company made money “when the presses were going up and down”.  And he was right!  But that was based on the days when the machines were the highest cost element of the business.  Today, although heavy machinery is still costly, the top expense of most companies is labor.  Thus my side of the debate we often had was that the company made money when “the people were going up and down”.  Thus our efforts at improving labor efficiency proved to be the key element in profit improvement.

But as suggested in the Justin Foster blog, it takes more than just efficiency improvement efforts alone.  Those have to come with leadership that inspires workers to be engaged, involved, and developed.  Thus, in order to significantly improve your business today, you have to first and foremost look into the mirror and assess what leadership skills you have that are helping or hurting your efforts.  It is hard to be objective about that, however, and often it takes third party viewpoint of a coach, mentor or advisor to candidly assess the traits and skills you have, and help develop better ways for you to lead and motivate your people to the performance levels that will achieve your company’s goals.

How Will Your Business End?

By now we're all familiar with that very important Steven Covey advice to "begin with the end in mind" ("The 7 Habits of Highly Effective People").  Yet in terms of starting and running our own businesses, "the end" is seemingly unknown, or somewhat short-sighted (as in "I want to build a million dollar business").  Business owners seldom think about what they'd like the business to look like at the time they cease to own it, nor do they think about the way it might be sold, transferred or closed.  However, as that time of retirement nears, these thoughts become more prevalent, even though the time needed to accomplish the dream may no longer exist.

In my book, "Final Act of Ownership", I discussed the process of selling the business, and in addition, the characteristics that improve value.  These are the very things that are usually part of "the end" that most of us dream of.  So wouldn't it make sense that when we "begin" our businesses, we start right away to work on these value-producing elements?

Think of it this way... when we begin by working on selling our business, we actually create a more valuable business, faster.  A more valuable business is one that typically generates more money, so the owner can take home more of it.  Making more money is great, and is usually accompanied by having more fun.  Now isn't that the type of business most of us dream of, a money-making, fun enterprise, that will ultimately fund the bulk of our retirement?

Of course it is, but then the question becomes, what is it that needs to be done to create that dream?  I suggest three big picture strategies:

• Educate yourself about what could or should happen at "the end".  What makes a business more valuable?  What type of buyer would be interested in the business you are striving to build?  How would you demonstrate the value of your business?
• Systematize your business.  The more you can create a business that can operate without you, the owner, the more valuable it typically becomes.  Work also on creating excellence in the core functions of your business:  Marketing & Sales, Financial performance, Operations, Strategic direction, and the all-important People & Teamwork area.
• Reach out to others for advice, mentoring, coaching, ideas, or whatever form it takes for others to fill the need you have to fill the gaps of your own understanding.

Most entrepreneurs start a business doing something they are technically good at, without a lot of thought to where their technical expertise may lead them.  But with just a little more thought about "the end", business success in our communities will grow, and the financial rewards will be extended beyond the ownership of the business.

"Final Act of Ownership"

Did you ever start out to do something small, and it turned into a big deal?  Sometimes that happens when the small thing goes wrong, and fixing it is a big deal.  But sometimes the small thing just grows until suddenly you realize you have a big thing on your hands.  That’s the way my latest big thing started, and now I find myself with a big announcement to make.  I’ve written a book!

I started out writing a small “white paper” of sorts on the topic of selling a small business.  But the project grew as I realized that every sentence I wrote led to another piece of important information that business owners needed to know.  I found that there are really few resources available to the small business owner on this topic.  And many of them are written in a way that may be a little difficult to follow for most of us.  But owners of businesses that are valued less than $1.0 to $1.5 million really need some understanding of the business selling process.  So I wrote to fill that void.

So here are the details of my big announcement:  My book (boy, does that sound weird) is titled “Final Act of Ownership”.  It is available on Amazon in both ebook (Kindle) and print versions.  It covers the overview and basics of the business sale process.  It is meant to help owners understand what to expect, as well as how to prepare for a business sale that maximizes the valuation the owner might receive.  It will help take some of the mystery out of the process, which most of us only get to do once in our lifetime, in our final act of ownership.  So we want to get it right!

Millions of baby boomer business owners are poised to exit their businesses in the next several years.  If you know a few of them, my hope is that you will at least mention “Final Act of Ownership” as a resource worth reading ahead of their business sale.  It could literally mean the difference of tens, or even hundreds, of thousands of dollars in their nest egg at time of retirement.  And what a gift that can be to the business owner who has poured their life into their business and now hopes to harvest the business to serve the rest of their life as well.

I’m proud of the work, and believe that it will make a difference for readers.  Placing your order today at www.amazon.com/author/jerrybaltus will help launch the book, and raise its stature on Amazon so that others will find it easily.  If you are interested enough to read “Final Act of Ownership”, I hope you’ll let me know how you like it.  I welcome your questions and comments on this topic in general.  You’ll be seeing more marketing for the book, and your help in spreading the word about it would be the best advertising any author could hope for.