Business Owners should take some time to assess their financial knowledge and skills. Financial Literacy is the knowledge and understanding of financial matters, which would allow an individual to make informed financial decisions. Business Owners make hundreds of decisions every week, ranging from the type of coffee to have in the break room to developing a marketing strategy. Obviously, some of these decisions cause more financially consequence than others. One of the most consequential decisions that every Business Owner will eventually make is the decision to transition out of their business with an exit strategy.
Exiting your Business on your Terms
Exiting your business is a decision that every Business Owner is going to have to make. There are a variety of reasons why a Business Owner would want to exit their business: retirement, illness, desire to do something else, etc. Regardless of the reason, Business Owners should carefully consider how they want to exit their business. Ideally, the Business Owner would have thought about this eventual transition long in advance. But if you haven’t, Financial Literacy Month is a great time to start.
Developing your Exit Strategy: Items to Consider
As you are thinking about developing an exit strategy, you should keep in mind the end goal. That is, the successful sale of your thriving business, due to the fact that your business is not directly dependent on you for day-to-day operations. You should be prepared to have two plans that accomplish that goal.
The Emergency Plan
This plan is a short term solution and should be designed with that in mind. Make sure that you cross-train your most trusted employees (or management team) to handle your responsibilities in the company. If you are the only person who knows how to do key jobs in the company and you can no longer do them, your business is destined to fail even if you are only incapacitated for a short period of time. Make sure you inform your employees about who will be in charge if you are no longer working in the business, either permanently or temporarily. After you have trained them, make sure that your employees have the opportunity to practice what they have learned.
The Long-Term Plan
This plan is a more traditional exit strategy. It should take into account the Business Owner transitioning away from the business completely and the ownership of the business transferring to a new owner. Here are some items you should prepare:
- A Formal Training Plan: While planning your long term exit strategy, you should write down all of the critical functions needed to operate the business. You should have already shared these responsibilities with your management team as part of your emergency plan. Post-sale, immerse your successor in your business so they see the depth and breadth of the operation. This may sound simple enough, but there is a certain amount of “letting go” when teaching your successor. Allowing them to learn, grow, and make mistakes before assuming the helm.
- Establish a Time Table: Set up a training timetable and a timetable for shifting control of the company. This empowers your successor and management team to make decisions as you transition from the day to day operations. Additionally, a timetable motivates your successor to move through the training quickly. They can have a clear understanding of the roles of the business before the former owner leaves the business entirely.
While you may not be ready to exit your business now, it is extremely important that you prepare. That way, you are able to exit your business on your terms. Ultimately, your successor’s success or failure is up to them. By laying the groundwork, providing comprehensive training, and having a great management team, you can help your successor continue your legacy of success.