Posts tagged with: legacy
David Kong in his Fortune.com commentary: Best Western CEO: Why you should never get promoted too quickly, stated:
“When we’re young, especially in our 20s, no one is thinking about retirement. But everyone’s career comes to an end, at some point. So it’s never too early to start focusing on your legacy. We should think about how we want to be remembered not just in our company, or our industry, but in our family and amongst our friends.”
It can take a lifetime to build a legacy or it can be galvanized overnight. The challenge is to consciously choose what you want to be remembered for. If we abdicate this opportunity, others will decide what our legacy will be or if it (meaning us) is even remembered.
If you value how you will be remembered, what do you want it to be?
There are two sides to legacy
On the qualitative side, your legacy preserves what you stand for personally and in your business:
The challenge is that most business owners are so busy operating their business that these larger parameters which have long term impact get sidelined or neglected.
On the fiscal quantitative side, your legacy will depend on a number of extremely personal decisions:
• How much money do you need for personal financial freedom?
• What lifestyle are you planning for beyond the business?
• How much money do you want to be able to pass on to family to secure their future for generations?
• What philanthropic commitments do you aspire to make in your lifetime or as bequests?
Your answers to these questions depend on many factors. In some ways the financial decisions are easier than the qualitative ones!
Starting now, take time to reflect:
• Are you having a positive and lasting impact on your team or customers?
• Do your actions inspire the people around you?
• Have you made a transformational impact on the company you built? On your industry? Or the people you care the most about?
• How do you want them to value that experience?
In building your legacy and providing security for your dynasty, it’s imperative that your plans ensure you do not outlive your money. You do not want your legacy clouded or tarnished by inadequate planning for your own lifetime.
Your business and personal legacy plans take time to define, test and execute. It does not come together overnight, or in the midst of the intense transaction process. Rather, it takes contemplation and preparation over the years leading up to that transaction and transition.
The planning for your reinvention, legacy and dynasty should be established before you let go/cash out of your business. To focus on your legacy, integrate your reinvention planning with your exit planning to achieve your ideal qualitative and quantitative outcome.
Your legacy is about your journeys, your values and the truly lasting and positive impact you make. What will yours be?
From a personal or emotional perspective, it is understandable why you might avoid both succession planning and how you will monetize the wealth you’ve built in your business. To build your legacy now takes time. Yet, in every survey of owners since 2005, 80-90% of all owners of private and family run business admit that they avoid, deny, postpone and procrastinate on these strategic planning efforts.
It’s personal, it’s emotional. Which means it’s messy.
You Can’t Build Legacy Overnight
Universally, they keep ‘kicking the can’ down the road saying they don’t need to start planning for at least another ‘five years’. However, failing to embrace long-term strategic planning for your business, your family and your financial future; can have a critical impact on the outcome you achieve vs. the outcome you envision as your legacy. You can’t build legacy overnight. You can’t ensure your dynasty will safeguard and preserve your legacy just because you want it.
Building, protecting and preserving your legacy is your responsibility long before you pass on ownership, control and/or responsibility for your business and its asset value. Personal and emotional objectives and obstacles take time – years not weeks – to work through.
‘Do-Nothing‘ Owners Risk Everything
The owners who avoid or procrastinate structuring their business and other assets to provide a legacy, are the same ‘do-nothing’ owners who risk everything because they never monetize their business for themselves or the next 100 years of their family. It’s much harder if not impossible for your spouse or children to build and preserve your legacy after your demise.
Putting your family, your employees and all your stakeholders at risk is preventable, if you take action. You can avoid a range of dire consequences of not planning for and preparing your legacy if you start now. They include:
- If you don’t define your legacy, how will others know your wishes?
- If you don’t plan for the assets to sustain your legacy, your executor may not be able to fulfill your wishes.
- Specify ‘what if’ conditions and your decision-trees.
- Without communication with the family and business stakeholders now, the business and the family objectives may clash – putting both at risk without you to mediate.
As a business owner, you probably were like me when you started your business. You had at least an inkling of the legacy and dynasty you wanted to leave behind when you pass on; even if you never put it into words to share with anyone else. Now, it’s time to hone that legacy to a luster to last 100 years for you and generations to come. The sooner you start planning, the easier it is to execute, the simpler it is to communicate and perpetuate; and the greater results you can anticipate.
It is possible do that with some early business and personal planning, and taking strategic decisions in terms of growth, value, exit options, succession, ownership, reinvention, and your future lifestyle.
Look at some of your options when you take control:
- You can prepare the business and the next generation for continued success in a family business
- You can establish a family foundation and/or a family office to preserve your legacy
- You can sell your business for maximum value
- You can explore a range of strategic partnerships
- You can retain ownership but pass on control and/ or responsibility
- You can lay out a 100 year plan for the business and for the family
There’s no single solution for all business owners. But there is a process to make sure your chosen transition occurs on your timeline to protect and preserve the legacy you imagined.
Don’t let personal or emotional baggage hold you back. Don’t kick the can down the road even one more day. Start today to build your legacy now.
I’ve been hosting the radio show, Exit This Way on URBusinessNetwork for going on a year now. We’ve produced over 130 interviews to help owners of privately held businesses, like you, to understand and prepare for the biggest payday of your life – selling/ scaling/ cashing out of your business on your terms on your timeline.
URBusinessNetwork today posted an extensive blog about the Exit This Way show and what we do at This Way Out Group. Check it out: http://urbusinessnetwork.com/kerri-salls-is-host-of-exit-this-way-on-the-ur-business-network/
Having a show on exit strategies sounded like a narrow topic but Kerri has recorded over 100 shows and continues to amaze us with her continuing to produce relevant content. She has introduced us to Lawyers, Accountants, Investment Bankers, Business Experts and entrepreneurs from across the world. Her message is that it’s never too early or too late to plan your exit.
If you have an exit story you’d like to share, or you know an expert who can contribute to the discussion of what owners like you need to know now, have them contact me. I always welcome new interesting guests for a conversation you need to hear to prepare for your exit, whether in three years or thirty years.
At This Way Out Group we believe an owner should not try to sell/scale/pass on their business to a successor on their own or with just one or two expert advisors. We know it takes a team. And to be successful achieving your optimal exit, that team must be coordinated to cooperate and collaborate in your best interest.
The second part of our new paradigm is advocating that every business should have an exit plan from day one, as a framework for every decision you make. If you didn’t start with a plan, start now.
The third leg of our new approach is educating you that early exits are in your best interest ( the owner).
Listen to the shows we’ve recorded on Exit This Way. Our guests contribute to this new paradigm shift. Down load them to your Ipod and listen in the car. You will get an unparalleled education you cannot find anywhere else.
To learn more about how our new model can work for you, your business, your family and your legacy, email me or call.
You can exit your business on your terms so you can transition to the lifestyle of your dreams with the wealth to pursue your reinvention (venture, adventure, avocation, hobby, retirement)
But what you can’t do is assume you can simply hire a team of experts and just walk away from your business in the next six months.
Start with your exit criteria to achieve your ultimate goals as you transition to your reinvention.
• Freedom — What does freedom look like to you when you exit your business, after the exit transaction is complete?
• Control — Who’s in control of decisions, strategy, budget, operations, and sales now? Who will be in control of each area of the business when you exit? Have you transitioned the decisions and control to one person, to a team of leaders or to no one leaving a vacuum in the business?
• Wealth — What is your wealth requirement for your reinvention and lifestyle after you exit? How do you define wealth? How much of the wealth you need for your reinvention must come from the business? Can you liquidate the business to produce that level of wealth to achieve your other exit criteria?
• Liquidity — How much liquidity do you need immediately when you exit? How long can you wait to receive final payment?
• Timeline — What is your ideal timeline for your exit? For your reinvention? For liquidity?
• Legacy — What’s your definition of the legacy you want to leave behind? What do you and your business stand for? What do you want to be remembered for? How can you achieve that?
• Dynasty — Do you want to build a family dynasty? What would that look like? What do you have to put in place to realize your dynasty?
We’ve gone through a long list of experts.
I hear you saying:
“But Kerri, I’ve never needed all these people before, why do I need them now, when I’m getting ready to get out of business?”
It’s a normal knee-jerk reaction to resist bringing so many people to the table. You need this full team of experts now to:
- Build a strong deep foundation
- Accelerate growth
- Protect all intellectual property
- Get all governance up to date and compliant
- Get the books meticulously clean ready for an audit and due diligence
- Maximize valuation
- Get all your financial advisors: your accountants, tax advisor, estate attorney and wealth advisor, on the same page – early
- Expand exit options
- Ensure the business is buyer ready
- Transition your role from operational to strategic demonstrating that the value is in the business, not you
- Prepare you, your team, your family for your exit
- Prepare you and your family for your reinvention
- Document and codify every system, strategy, process and procedure in the business.
It does cost money to exit well, but it does not cost more money.The return on your investment in your team is much greater too, when you bring a full team to the table.
The cost to you, your legacy and your family will be compounded and the possible returns reduced, if you abdicate and don’t act now.
When you surround yourself with experts to support the process, your business will be stronger, demonstrate appealing growth projections, will have a higher valuation than otherwise possible, and become buyer attractive.
As a result, you can and will be able to exit your business by intention on your terms instead of closing the doors with no monetary gain by default.
Preparing a written transition plan is a critical element of your whole exit strategy. But surveys consistently verify that CEOs avoid this element regardless of age, or size of the business. There’s a concerted dearth of attention to how they will transition out of the business by CEOs, never mind determining to what they are transitioning.
- Fail to get the highest possible value for their business, or
- Transfer it to an ill-prepared successor, or
- End up paying too much in taxes
or even all of the above.
Whatever your goals or your timeline, it is time to plan for your exit now. Experts agree that if you want to maximize the value from all your sweat equity, you must invest in proper planning years in advance of your intended exit.
The ROCG Report results confirm:
- There is an overall lack of planning. Their survey found that only 9% of business owners have a formal written plan that includes succession and transition planning for the business. That means 91% of all CEOs in the US have no plan on how they will transition out of day to day operations.
- Current estimates report that more than 40% of business owners plan to exit within the next five years; and 80% of all business owners plan to exit within the next 10 years.
- But on a timeline of market trends, there will be many more sellers than buyers in the market place from 2013 – 2018, just when that first 40% are expecting to sell their business.
It is a disaster waiting to happen. It will only be compounded when you add in the fact that 21 million baby boomers will be selling off their businesses over the next 15 years.
Will widespread catastrophic losses be the result?
Without proper advance planning, we could see wave after wave of business owners fail to get out with the wealth they need for their reinvention. These CEOs:
- May not be in position to maximize their personal finances for financial independence when they sell sale;
- May be forced to sell at a deep discount or accept unfavorable conditions;
- May risk a business closure, leaving them with nothing;
- May have a business that ultimately fails and/or potentially destroys family harmony in the transfer to family members.
Timely transition planning is a core strategy to avoid facing these types of obstacles and despair. Pro-active strategic business planning and transition planning can help to ensure that the transition is successful at meeting all your goals for the business as well as your lifestyle and legacy objectives.
There are many aspects to exit planning that business owners take for granted, never think about, or abdicate to others. This naiveté is one of the biggest roadblocks to getting out on terms that give you the full value of the business. This scope of this book is broader, more all encompassing than just the finances of the exit transaction. You can find experts and financial models to help with the exit transaction in financial terms and you will need them.
To tame the numbers beast before you get there and make it absolutely manageable for any business owner, here are six core elements to consider on the financial side of exit planning:
- Setting Financial Goals
Your long-term income needs and the financial requirements of your reinvention (new venture, avocation, adventure, hobby). From these financial requirements, you can determine the sale price and terms you want your business to deliver when you exit. Initially, these two numbers may not match up. That’s just one good reason to start planning early.
- Current Value of the Business
To be buyer ready, you should always know the current value of your business. You won’t be disappointed by a buyer’s offer if you know the current fair market value of your business. Valuation experts analyze the business books and other materials and compare its profits and losses to relevant businesses in your region and/or industry. With the current competitive value in mind, you can track your timeline to exit on your terms and meet your financial goals.
- Build Business Value
To exit early and maximize the value you walk away with, it is imperative to always be building business value. If you are always adding value, accelerating growth and making the business more buyer attractive, you will have the opportunity to exit with the financial freedom for your reinvention. If you have not been building value all along, start now so that you can sell the business for what you know it’s worth and meet your long-term financial goals.
- Selling a Business
Selling a business has many parallels to selling a house. Once you decide to sell and the business is buyer ready, it can still take 6 months to 2 years to close a transaction. Before you must sell (for any reason), consider all your exit options, all possible buyers and the impact of each option on your exit, on the future of the business and the future employment of your team with the business. Before you choose a specific option, also investigate the tax impact on you and the business. The tradeoffs can be severe.
- Contingency Plans
Murphy’s Law – if something can go wrong, it will. The same is true for your business, as well as your exit from the business. Knowing this up front, is another incentive to start early and aim for an early exit. You want to build a contingency plan for the business in case of any crisis or emergency. For example: you need an emergency plan documented with a copy kept totally offsite – if for any reason you can’t get into your offices, you lose power and can’t access computers or passwords, there’s a fire/blizzard/hurricane that destroys your business, etc. Plans like these and plans for other types of unexpected situations should be built right into your business exit plan from the outset. You also need a documented contingency plan in case you, the owner/CEO, become physically or mentally disabled, have a heart attack/stroke and are laid up for six months or even worse, if you should die. Additionally, your contingency plan must include all current buy-sell agreements, services, resources, client orders, employee contracts, key employee incentive programs, business/disability/life insurance policies that are in effect.
- Life and Legacy Beyond Business
With your comprehensive business exit plan and strategic contingency plan in place, you can explore and consider options for reinvention alongside your estate planning goals to leave a legacy and secure your dynasty. Much of your financial independence beyond the business as well as your estate planning are tied to the sale of the business (aka a liquidity event). You have more estate planning options, more tax advantaged options and more ways to maintain the owner benefits you enjoy; if you start this planning early – ideally, five years before you can fund those options at your exit.
Your financial position, holdings, and control over the business and those holdings, will change drastically and instantly once you sell the business. Therefore, you must revisit your personal financial plan and your estate plan at each business milestone of the exit process. As you make choices for exit options and reinvention opportunities you want to pursue, be sure to circle round to be sure they still coincide with your business exit and contingency plans.
Stating the obvious, this is not a complete discussion of the financial aspects of exiting your business. It does however give you a general outline of the scope of the financial issues to address with various key experts on your team. Just on the financial side, you can begin to see the value of starting now, planning early and preparing to maximize the value of your business when you want to get out.
Business Exit Planning Is Easier Than The US Military Exiting Iraq But More Complex Than Selling A House
It’s true. Business Exit Planning Is Easier Than The US Military Exiting Iraq — But More Complex Than Selling A House.
The majority of business owners avoid, procrastinate, deny, and postpone any discussion of business exit planning. The statistics consistently report 95% of all CEOs find excuses to not plan their exit.
The anticipated fear and overwhelm are exaggerated. When you put it in perspective, exiting your business is far easier and produces many more reasons for you to celebrate, than the recent US military exit from Iraq.
No CEO Can Do It Alone.
Just like it took large teams of experts and years to plan and implement the US military exit from Iraq; you need to surround yourself with a team of experts who know more than you do about exit strategies and achieving your exit objectives.
I concede that your business exit is not as straightforward as selling your house or buying investment property. But, with a little help from your exit strategist and your transaction experts, you can focus on what you do best in the business while your team streamlines the process of exiting your business on your terms and on your time line.
The absence of planning is one of the deadliest oversights a CEO can succumb to. CEOs know better. They just don’t invest the time and effort to plan their exit. The default option is that you will exit your business feet first or worse, – close up shop with nothing to show for all your time, effort, expertise and resources invested. Too many CEOs resign themselves to never monetize their business, never fulfill their dreams or live their legacy.
Business exit planning is easier and much more inexpensive than the US military exit from Iraq. In fact, exit planning actually will make you money, make the business stronger and more valuable, and provide a plan for your next steps, your reinvention after you exit.