DISPOSING OF YOUR BUSINESS
Any of us who own and operate a small business must deal with the issue of disposing of the business sooner or later.
I'm talking about the kind of business most of us have - something ranging in size from a sideline business to a Mom and Pop to a business having 10 or so employees. A business this size will typically support 3 to 5 families, including its owner.
Typically, the owner is or has been the driving force of the business as well as its financial guarantor. And typically the business and its owner are well-known and respected in the community.
Can you picture this kind of business? It might be your family dentist, or a local attorney. It could be a locally-owned painting company, a restaurant, or a full-service garage.
As the years go by, the business predictably becomes the owner. Less obvious, but just as important, the owner becomes the business!
That's when you hear the phrase, s/he doesnt seem to have a life outside work.
Let's discuss a situation that is very common and familiar to most of us - the owner who is approaching retirement age (or maybe is already there!) and who may have age-related health issues.
For this owner, disposing of a business boils down to 3 key points:
- When will it happen?
- How will it happen:
- Who's in charge?
WHEN WILL IT HAPPEN?
Will it end with a planned sale, or suddenly with a stroke, heart attack, or car wreck?
HOW WILL IT HAPPEN?
Will it be sold in a way that provides the owner with a retirement income, the staff with continued employment, and most importantly, the customers with the uninterrupted service they have come to rely on?
Or will it happen suddenly and without warning, with prolonged sickness or death? Think of an aging owner who becomes vulnerable to heart attack, stroke, bad hips, and so on. Or possibly a younger owner who suddenly suffers their own special tragedy.
WHO'S IN CHARGE?
You can probably see my argument. If the owner waits too long and doesn't prepare in advance, someone else will most definitely take charge and possibly in a way not to anyones liking. The logical conclusion is that all owners must prepare in advance for their own departure.
It's so obviously simple, and yet most owners don't or won't do it.
In my field, I ask all owners what their exit strategy (another name for disposing of the business) will be. Here is a sample of what I have been told.
Don't know. Guess I'll just drop in my tracks. Heard that one last month. Business has $1,000,000 in annual revenue, and may be worth twice that much.
I'll just close the doors someday. The business has $250,000 in annual revenue, no debt, and $70,000 in machine tools.
I'm not ready to stop yet. Died of a heart attack two months ago.
So why do owners who have been so successful in all other aspects of their business life fail to protect themselves, their employees, their customers, and their families at the end of their business life?
While there may be as many answers to the question as there are business owners, I think most answers rest with one of three broad categories. These categories are:
- Denial. Of increasing age, their own mortality, diminished capacity. All of us are vulnerable to denial, and probably the prototypical capable and independent business owner is more vulnerable than most.
- Don't know how. To sell the business, or to transfer it to a younger generation.
- No vision of the next stage of life. I didn't say retirement because that speaks of rocking chairs and shawls
Having worked a lot with aging owners - I'm one myself - suspect that in building our business, we have allowed the business to become us. The owner feels s/he has no identity outside the business and can't envision a life outside the now-comfortable roles and patterns that have developed over the years.
If true, what may be needed is an identity, a role, and a pattern for a post-sale life that is more appealing than continuing to go to work.
Planning to dispose of the business in a rational way is hard work. It takes a lot of time, and a lot of effort.
But consider the alternative. The strong and successful owner who has made all the decisions down through the years may be choosing to let someone else make the final decisions regarding his life's work.
Beacon Small Business Solutions