For twenty years now I have been advising people on their finances. Whether personal financial planning or advising business owners on their succession plan, I have held hundreds if not thousands of conversations with people about their future.
During this time, I have noticed that there are two times of the year when I am contacted more than others. The first is September, the second is January.
A period of reflection often occurs when someone returns to work from a holiday, or from a restful Christmas break. This is less about feeling unhappy at being back at work, and as a result of having stepped away from the day to day running of a business. Not being tied up answering emails and in meetings allows space to think about the future.
If this describes you, and you’re feeling either thoughtful or restless about the future of your business, here are my suggestions for the three questions you need to answer.
Question one: How much do you need your business to be worth?
It is common for owners to be asked, for example by business advisors, ‘What are you doing to add value to your business?’. I believe that this is the wrong question.
What if the value of your business is already higher than the amount you need to lead a happy life? If this is the case, then perhaps you are able to exit your business now. And this means you have options.
Answering this question comes in two stages. Firstly, get a valuation of the business (we can help arrange this). Second, to undertake financial planning, in order to work out your ‘How much is enough’ figure. Then compare the two numbers.
The answer may tell you that you have more options now than you think, either because your business is already worth what you needed to be worth (or will be within the next few years given the business plans).
If either of these are the case, then you are ready for the second question.
Question two: How do I want to exit my business?
There are three main ways of exiting, in general terms. The first is a trade sale, whereby the business is usually subsumed into another organisation. The second is a management buyout, and the third is a sale to employee Ownership trust (EOT). For both these, the business continues – hopefully!
Preparing a business for sale takes preparation, which can take several years. Remember – you will be paid out of the future profits of the business. You need to take time to get the business ready for you to leave.
Assuming you are like most business owners, and you would like to leave your business as a legacy while also being paid a fair value, then you will move onto the third question.
Question three: What do I have to do to get my business ready for me to leave and get paid for its value?
For the answer to this question, get in touch! Whether it is personal consultancy, our online programme, or just for an initial chat, we have the answers.