Kerri, Author at This Way Out Group - Page 21 of 25
Ideas, inspiration and insights on goals and goal setting abound. That’s a good place to start, but it’s not enough to get you to the finish line of achieving your goals on your terms, on your timeline.
Goal achievement starts with good goals, goal setting criteria, and a timeline. To get you there, you also need to identify your criteria, and what will keep you focused and accountable to ensure you realize wealth from your efforts.
Any big hairy audacious goal you set must lead to long-term freedom and satisfaction. In business, that translates to driving your business to achieve those long-term goals that will produce wealth, not just an income. A paycheck and profits are not the same thing. One is immediate; the other is a longer focus and strategy.
What’s Your Freedom Number?
Do you know what your freedom number is? Is it a minimum income/year? Is it a net worth of $$$? How much would it take for you to feel you have achieved your goal?
Your freedom number is essential to every decision you make in goal setting and goal achievement. You must know your freedom number to make better decisions and continue to move forward toward your goal.
Each person has a set point for wealth, based on your life experiences. For some people it’s all about cash flow. For most of us looking ahead to financial freedom, that freedom number ranges in the $Millions.
Your own definition of financial freedom will be key to your plans to get there. An arbitrary number is not useful. Instead, you need to back into your freedom number. It could include such criteria as:
- Own your home – mortgage-free
- Be completely debt-free
- Assets under management produce an unearned income stream that equals or exceeds your after-tax lifestyle expenses
- Legacy building trusts that preserve principal, minimize taxes or provide perpetual income for families, gifting or other philanthropic purposes
- Insurance policies to provide annuities
- Insurance policies to protect your estate in the case of a disability or long-term illness
Your freedom number is only a starting point, a compass heading for you and your advisors to work towards. Indeed, your freedom number will drive your determination to achieve those goals to produce wealth.
Ideally, your exit strategy should be part of your business plan from the outset, not just for businesses with outside funding. Every business needs an exit plan, even if you never got outside funding. If it wasn’t part of your business plan or your strategic plan, add it to your agenda for your next annual planning retreat to ensure that starting this year, you will lay out your exit strategy tied to your operational goals.
Here are four steps to ensure your successful exit strategy:
1. Take a holistic approach to planning your exit. That requires systematizing your whole business: not just finances, and cleaning up the books; but also:
• extracting value for you and your family
• maximizing value before you exit or sell
• the structure – what’s easiest to sell, or what can be monetized most easily
• systems ,strategies, process – get them out of your head
• team impact – organizational dynamics, contracts, continuity
• client/sales impact.
2. Consider and evaluate all the possible exit scenarios that might work for you and your business, e.g., sell a practice or sell your list; buyout by employees or partners, be acquired, appoint a successor or family member to continue the business, IPO. With each option, explore all the variations that might suit you.
Remember, your choices are greater the sooner you start planning your exit and the clearer you are on the goal you want to achieve and when.
3. Include your exit strategy in your annual goal setting. Align your short-list of chosen exit strategies with every goal they set so that each goal achievement moves you closer to your exit every year.
4. Make your exit strategy one of the criteria of every decision you make, every goal you set, so every goal you achieve is tied to and focused on that ideal exit strategy.
Goal achievers begin with the end in mind and an absolute conviction and commitment to achieve their big bold audacious goals. If you have an exit strategy for your business, you are already setting your business up for success, achieving outrageous goals and on track to realize your exit strategy. If you don’t have an exit strategy, you are not alone. Most businesses (of all sizes) never plan their exit strategy.
That’s not to say this is a good thing; just that the majority of businesses skip this step and then wonder why they can’t exit when they want and the way they want.
When Is The Right Time To Plan Your Exit Strategy?
There is no wrong time to plan your exit, unless you never do it.
The right time is the moment you realize that you don’t have one. That could be while you are starting your business; it could be when you launch and go live; it could be part of your annual planning retreat or your long-term planning strategy. The wrong time to plan your exit is the last 12 months before you want to move on.
There’s a lot on your plate when you start a business. Of course, you need to be clear on your mission and vision, your business model, your market research, marketing and sales strategy and your operations to implement your business plan. You can be consumed by the day to day responsibilities and urgent demand. All of this eats up time.
There’s another critical piece that’s easy to put off but very critical to achieving your long term goals and that is your exit strategy.
If you set your exit strategy as part of your initial goal setting then all your goal achievements will lead towards your ideal exit strategy.
Here are 5 recommendations to ensure you set goals that get you to a successful exit:
1. Choose the right exit strategy for your goals
You have monthly and annual goals for your business. You want to commit to these intermediate goals only if they are aligned with your long term goals and the ultimate goal achievement of your ideal exit strategy.
2. Set business growth goals aligned with your exit strategy
Your growth goals are essential to the healthy, strength and survival of your business. When you look at your growth goals in the context of the exit strategy you want to implement, be sure your growth goals are taking you in the same direction. Growth that is in conflict with your exit plan or competes with your long term goals will hurt the business and limit your ability to achieve your exit strategy.
3. Identify goals to increase value
The value of the business is not just in terms of assets or cash flow. It’s also in your intellectual property. Your intellectual property could be in your team, your processes, the relationships you cultivate and maintain with clients and vendors, etc. So your goals to increase value before your exit could be in these less quantifiable areas that translate into a much higher valuation for the firm.
4. Plan your exit strategy by intention rather than by default
This sounds like a lot of work. In fact, it is. But, if you don’t do the work to plan your exit – then your dream of achieving an ideal lifestyle, living your legacy and leaving a dynasty – then you are abdicating both the responsibility and the reward. If you don’t plan your exit by design, then you will settle for what you get by default.
5. Systematize your exit strategy to maximize value
The more you can systematize your business so someone else can run it equally well without out you, the more a buyer will be willing to pay you to keep it going. The better you are at systematizing everything, the easier it is for a broker to pitch and leverage that value for a higher price. This step takes discipline and consistency starting long before you intend to exit.
Apply these five recommendations to get the results you want. That’s how you achieve every goal you set. That’s how you ensure your own successful exit strategy
Whether you address it from the outset of your business or later down the road, every business owner needs an exit plan. Some business owners intend to sell the business for maximum profit, some want to sell it to successors or employees, others want to go public, and still others intend to keep it in the family.
In each case, taking the time to prepare the exit plan now will allow you, the owner to reach your ultimate goal with a comprehensive 360 view with all the pieces in place. Business-owner exit planning should begin five to 10 years before you want to retire or pass your business to your chosen successors.
Unfortunately, 95% of all business owners NEVER do exit planning. And they wonder why they end up with nothing when, on the day they get fed up and want to sell it as fast as they can; they accept the first offer they receive – at a discount of 30-50%.
That doesn’t have to be you.
Plenty of expert advisors will tell you that exit planning starts with your exit objectives and the retirement income you want to have – because that’s where they start working with clients.
There are a few other pieces you need to define BEFORE you can answer those two questions. They are core pieces of having a strong business foundation long before you consider implementing any exit strategy.
Before you can define your exit objectives, you must identify:
1. Your long-term ultimate goals for the business – with you or without you
2. How you want to secure your legacy now, before you leave
3. How you want to ensure your dynasty once you exit the business
4. Who you want to take leadership of your business (as owner, non-owner manager, or transition staff)
What still needs to be done in terms of business planning, contingency planning, and succession planning to position the business for maximum growth and value? Work on that planning first, as a prerequisite to detailed exit planning.
You may have multiple exit objectives. Be sure they are consistent. Then prioritize the outcomes. Selling fast, selling for maximum value and selling for 100% cash up front can be conflicting goals.
As part of your transition planning process, when you define what your next step will be after you exit, you’ll get a better idea of how much funding you need: for a new venture, to invest or for philanthropy; not just your personal retirement income. You’ll also get clear on your goal timeline and your options for what format the transaction can take.
The lifestyle you intend to pursue after the exit may expand or restrict the exit options you consider.
‘You don’t have to have a plan today.
You do have to start planning today.”
The more lead time you invest in building a strong business to achieve your ultimate goals, the more fruitful and fulfilling will be the exit strategy you can choose to implement.
Do you know where the value is in your business right now? Is the value in you, the owner/entrepreneur? Or is the value truly in the business itself?
This is the uncomfortable wakeup call for most entrepreneurs. Are the expertise and the business strategy all in your head, and in your proprietary files? Here’s the risk:
You have nothing to sell and
you have no exit options
if this is still true.
Instead, you can and should start now to:
- train others on different pieces,
- outsource different pieces, or
- start delegating more and more.
Start now because it takes time to transfer knowledge, expertise, systems and processes, nevermind responsibilities, to others. In some cases, you’ll know exactly what to delegate and who should be doing tasks instead of you. Sometimes you already know who should take on responsibilities or who is ready to step up to take on more responsibility. When you start early, you can train and groom people to grow into positions and responsibility – which ties them to the business more. Both add value to the business when you want to get out.
When you outsource, you have the flexibility to divide up work piecemeal and try different vendors and sources to get work done. When you start early, you can find those vendors who fit your needs and adapt well to suit your corporate culture and become an extension of your team, again adding value. And if a vendor is not an asset when you are trying to maximize value for a potential buyer, you have time to find and train the replacement within your timeline.
When you offload operational responsibilities, you can focus on leadership and strategy to make the business more valuable now and for a future buyer.
The side benefit of delegating, outsourcing and automating is that you free up time to work on your most valuable activities including your exit strategy to achieve your ultimate goal.
“Business owners do not plan to fail.
But 95% fail to plan. Don’t be one of them.”
You must know your exit date
(or at least the criteria for it)
and set it at least 2-3 years out.
In order to have time to systematize, streamline and leverage your business to get the maximum valuation.
To get the results you want:
- Your exit strategy must be part of your initial business plan
- Your exit strategy must be part of your annual plans every year
- Your exit strategy must be built into your 3 year goals from the outset
Identify Goals To Increase Value
What can you do to maximize the value in your business? To achieve your goal, you must:
- Sell more
- Increase prices
- Reach new markets
- Reduce costs
- Document your expertise
- Research and prove your market position
- Revisit your business plan, vision and mission statements
- Clean up your financials
Is The Value Right Now In You Or Your Business?
This is the uncomfortable wakeup call for most entrepreneurs. Are the expertise and the business strategy all in your head, and in your proprietary files? You have nothing to sell and you have no exit options if this is still true.
Instead, you can and should start to train others on different pieces, outsource different pieces, or start delegating more and more. The side benefit of delegating, outsourcing and automating is that you free up time to work on your most valuable activities including your exit strategy to achieve your goal.
“Business owners do not plan to fail.
But 95% fail to plan. Don’t be one of them.”
Do you have goals now? Do you have:
- Daily goals
- Weekly goals
- Monthly goals
- Quarterly goals
- Annual goals
- 3 year goals
- Exit goals
You need all of them if you want to achieve your exit goals.
They must be aligned and integrated.
Here’s a secret no one talks about but they DO want you to know:
Consistency among all these goals is essential or
- you will fail to exit,
- you will drastically reduce the value, AND
- you will pay a premium for the service providers in the exit market.
And yet, all of this is 100% avoidable!
The answer is to not just set goals but to stay focused to achieve your goals.
Do you have a timeline to achieve your goal? You have a choice starting today.
- You can sell quick, or any time you want OR
- You can take the time to position your business to sell high
You can’t do both.
I strongly recommend you work actively on your exit strategy starting now if you intend to implement it in the next 36 months. You have 12-24 months of work to do before you engage a broker, attorney, or CPA if you want to position your business for optimum sale.
Think about how much work is involved in getting your house ready to sell, improvements, repairs, decluttering, staging and curb appeal. The same is true for your business to get the highest valuation and an ideal buyer.
You need a goal, an exit strategy, a valuation number you are striving for, and a timeline. To do all four, you must do two things:
- Implement systems for every aspect of your business, in detail
- Get the business out of your head and documented.
- What does that mean to you?
- Goal achievement is only possible if you have a goal you want to get to.
Do you have a number you want the business to be worth?
- How long will it take to achieve your goal, achieve that number?
- How important is that number to your personal long term plans?
- Do you have a number that you need in the bank in order to secure your retirement?
- Do you want to live your legacy and leave a dynasty or do you want to work yourself into an early grave?
- Do you want to pass on the business to family or successors and create an exit package?
These are easy questions to ask. They are hard to answer. If you find yourself not doing this homework or you keep justifying why you don’t need to do this now, or you think it doesn’t apply to your business, then you are unconsciously jeopardizing your business and your future.