Planning For the End
Very few people, when they start a business, think about planning for the end. How that business will be concluded, but it probably is something that we should consider.
If we didn’t think about how our association with the business we are running was going to end when we started it, we should consider it now.
If you haven’t thought about your exit, then you must think about it now.
We should always plan with the end in mind.
The way I look at planning is not to start with where we are now and, try and get to the outcome.
Start with the outcome you want and move back to where you are now.
Then you will know what steps you need to take to get there.
The different ways you intend to end your association with your business may affect the planning decisions that you make between now and the end.
How you plan to conclude your association with your business, will have a massive impact on any planning strategies.
There are only three ways to bring your business to a conclusion.
Even if the worst happens, and someone dies while in a partnership, you should have already planned for it. I know that sounds a little bit stark. But you probably ought to start thinking about that, because that’s one of the ways to bring your association with a business to a conclusion.
It’s a very sudden exit and probably one you wouldn’t have planned for necessarily. But it’s something you should consider.
If you’re in a partnership, you must have a partnership agreement.
If you haven’t, I urge you to speak to a solicitor and get one drawn up.
There are only three ways to bring a business to a conclusion and or your association with that business to a conclusion.
That is to sell it, to transfer the ownership, (which is what often happens in the case of an unexpected death) or to close it.
There are some subtleties around those three things.
Different ways of going about them.
But you should plan for how you want to exit the business.
Because that affects the planning between now and when you expect that to happen.
In the Atomic Success Program, we recommend people come up with a vision for their business. The ‘Big Vision’ is the best version of your business possible.
What you would expect it to look like if everything was perfect.
What would the perfect version of your business look like?
Can you imagine that?
If you can, then how do you get there?
That is the Big Vision or Long-term plan.
Set a target 10 years away.
The Big Vision is where you want to be in 10 years, both for your business and your personal life.
Where do you want to be in 10 years?
My ideal customer is somebody who wants to end their association with their business, to retire in around that timeframe.
Someone who will be planning and working towards an endpoint of their own choosing, they’re going to retire on their own terms.
The idea of the Atomic Success Program is to make sure you can do that.
It is why I started looking at my business and what I wanted out of my personal life.
10 years is about as far ahead as we can sort of imagine.
We can’t know for sure what is going to happen in 10 years’ time.
We can’t know for sure what is going to happen tomorrow, but 10 years is far enough into the future However, it’s just about tangible. We can just about imagine it.
If you are 55 now and you want to retire at 65, you would be my ideal customer.
That is the 10-year vision, you will have an idea of what you need financially in 10 years’ time, so you can build a business to provide what is needed.
I used to use 5-year planning cycles.
But know my planning cycles have changed, and I use three, threes and a spare.
The reason for the spare year, is unexpected circumstances such as covid-19.
The three threes and a and spare year offers far more flexible planning in terms of what I call the goals for the business.
Every three years we set goals and then we try and achieve them.
The amount of the total vision we aim to achieve is 20% in the first planning cycle, & 30% of the total Vision in the second planning cycle.
This means in 66% of the total time, you have only achieved 50% of the vision, which means in the third planning cycle, you are aiming for the final 50%.
In that final three-year goal setting period is when we seriously need to be thinking about what are we going to do when we retire or how we finish our association with our business.
You might not be retiring, but you should have a three-year plan.
Your exit should be about three years. Long enough to start making the changes that mean you will have the most successful exit. That you get what you need from the business at that point.
This is why knowing what you need from the end of your association with your business is so important. Because right now you may think I’m definitely selling the business.
However, you may go through a number of those planning cycles and when you get three years out, you may have a different opinion, the market may have changed, stuff will happen, and you may have to change your exit strategy from sell it, to transfer it, or close it.
if we start with one exit strategy at the 10-year point, it may be impossible to change as things evolve around you.
But three years out, that final planning cycle is probably right. And you will stick with whatever your plan is from that point on.
Remember, when it comes to the actual end of your association with your business, you may not be in control of many of the variables. It might not still be the exit you planned. However, this way it should be closer to it, and you stand a much better chance of achieving the desired outcome.
Planning for the End – The 1-year Plan.
Every three-year planning cycle is made up of three 1-year plans.
In the final year you simply execute the plan and exit the business.
To bring your association with your business to a conclusion you need a one-year plan.
Anything less will not leave time to do everything that is required.
The Only Three possible Outcomes
Selling the Business
When it comes to selling your business, a major contributing factor to the price you will get for that business is dependent on whether you own the property.
Do you own the garage?
Do you own the land it sits on?
Do you own the building?
If you do, your business is going to be worth more.
The starting point for valuation of that business will be the property.
This is a key consideration.
If you want to sell your business to provide for your retirement, then it might be a good idea to start looking for premises to buy because that is going maximize the value of the business when you sell it.
You can sell the business if you don’t own the property, but you must have a business that runs without you. If you have a business that doesn’t run without you, if you are the business.
Sadly this is the case in, in too many cases, and it is difficult to value that business above the scrap value of the equipment belonging to that business.
Will the current landlord even allow transfer of the lease if the lease hasn’t come to a conclusion to the new business owner?
These are all things that you need to start to take into consideration, and start negotiations a long time before you decide to sell it.
They must be part of your final three-year goals. Finding out where you stand legally.
You may want to sell the business but keep the building, that is also an option.
But once again, what is the business worth dependent on whether the business runs without you. So, the priority is building a systemised business. Especially if you don’t own the building, this is vital. Otherwise, you do not have much to sell.
Because what you’re selling is a job and no one wants your job and that’s the truth.
Fattening the cat.
You may find that the real value in your business is going to be realised be at the end.
You need to maximize your asset.
This may be the case if you invested heavily in buying tools, equipment, and the property.
Which means you may not run the business in the most profitable way, to begin with.
You might want to build up a large customer base.
To do that you may not have put your prices up as high as they could be, therefore attracting customers based on price.
There are many, many ways to value a business.
There is a training topic on this, but what you have prioritised is lots of customers, and a big turnover. While investing back into the business for the business to be worth as much as possible. This investment will be only realised when you come to sell it, what we call fattening the cat strategy.
Building a Legacy
If you plan to transfer ownership of the business to somebody else, this is what we call building a legacy.
Once again, if you own the property is a consideration that you have to plan for.
In this instance. How are you going to transfer the ownership?
Who you are going transfer ownership to is the number one thing you need to establish.
If you’re passing it to your business partner that should be in
‘The Partnership Agreement’.
If you’re passing it down to a family member, are you sure that is what they want?
Or is there going be some sort of management or employee buyout?
If that’s the case, how are you going to divvy up the shares?
How many shares do you currently have?
Can you do this in a way that makes the employees have more interest in the business?
More skin in the game is the, is the commonly used term.
You may want to start transferring shares to the interested parties over a period of time until the point where they own more shares than you, they get to the 51 %.
They are the majority shareholders.
This all requires legal advice. It all needs planning.