3 Costly Mistakes When Transitioning Your Business
Let’s be blunt: Business owners are slightly emotional about their businesses, especially as time approaches for them to step away from control of their business. A lot of blood, sweat, and tears went into building your business – sleepless nights, times you didn’t know if you would make it, and sacrifices you still wonder if you should have made. Your business is not unlike your children if you think about it. How much passion, energy, focus, and discipline went into raising it? I dare say more than most people can fathom.
Perhaps this is why most business owners fail when it comes to selling their business. Yes, you heard that correctly. They fail. Perhaps because they don’t get top dollar or even what it is worth in certain scenarios. There is a significant amount of proof that businesses don’t often make it to the third generation. Or it could be that the business doesn’t survive beyond its founder at all.
You’re probably thinking, well, that is not me. That is not my business. That may be true, but statistics argue strongly against that, and here is why:
- Running on Empty…Too many business owners drive hard and fast until they simply can’t. Whether it is a health event, death, or that they are completely burnt out… they make the unfortunate mistake of waiting to plan for the transition of their business until one of these events occur.
Result: You are not getting top dollar. Your retirement outlook may be grim—financially and/or physically. And in some cases, your best hope is a fire sale or liquidation to take care of you and your family.
Tip: Start planning now! Whether you are 30, 50 or 70, you already always have two exit plans in place: 1. Leave vertically or 2. Leave horizontally.
- Buzzzzzz…Business owners are notorious for building a “honeybee” business. This implies that every question in the business comes back to the queen bee/ business owner in the hive. Note—this is often the reason for burnout. This is not an attractive business for a buyer or any successor, for that matter. Why would they want a business that lives and dies by the owner? The preference for any buyer or successor is a self-managed business.
Result: You are not getting top dollar. Your retirement outlook may be grim—financially and/or physically. You may not be able to sell your business. Your business may not survive the transition unless you continue to be a big part of it.
Tip: Focus on making your business a self-managed company. Think of Christmas Tree instead of Honeybee. Perhaps you set a goal to be able to take a 365-day vacation, and your business grows while you are gone. It is true that no one can do what you do or know everything you know – but this is also proof that your business can’t transition successfully.
- Everything is a Priority…This is the core of a business owner’s life. Too many business owners live too much in the moment and in their business rather than out of the moment and on their business. This leaves little time to strategically plan, have a work-life balance, and dream about the future. Not only does the business ultimately suffer, but so does your health, family, and future or your retirement.
Result: You are not getting top dollar. Your retirement outlook may be grim—financially and/or physically and/or mentally. Your business won’t be ready for a transition and neither will you.
Tip: Your business – and you! – should be ready to transition or sell every quarter, and every quarter you have the choice to keep it and grow or go. The question is, what holes exist today that aren’t allowing this to happen?
There is a common component here and you probably won’t like it because that component is you, the business owner. Remember, all progress starts by telling the truth. This is a lesson we learned years ago from Dan Sullivan, the founder of Strategic Coach. So, if you want a business that is attractive and ready to transition, if you want to leave a lasting legacy, and if you want to retire successfully and stay retired successfully; then now is the time to do something about it…and the good news is that we are here to help!