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Chris Alp, a Director of Alp McNamara, Melbourne-based specialists in wealth protection for privately-owned businesses, says if your business is your legacy, you need to take time to plan what will happen to it when it's no longer in your hands.
Business owners rarely stop to think about the future. Planning for the coming few months seems hard enough...let alone thinking about the long term future of their business, themselves, their wealth and their families. If they could look far enough into the future, they would realise that one day the business will no longer be theirs. Somehow, it will all come to an end.
All going well, the business will either be acquired by:
your children (sadly becoming a more and more infrequent event)
your staff (who would need to find or negotiate the funding)
your competitors (in most cases you know who they are)
your suppliers or clients (who seek to extend their supply lines)
or in some rare instances, the public (although an IPO is very expensive)
Hopefully you will be paid well for the asset that you took years to build. Sadly, not all businesses end up that way.
All too often, businesses simply come to an end. They close the doors, or those doors are closed for them. And where the business owner has put everything into the business (“it‟s my superannuation”) and mortgaged their house to provide security, such consequences can be tragic. No one wants to lose everything when they get to their 50s (or any other age, for that matter).
After advising business owners for 30 years, there is probably one key piece of advice that always comes home: you need to plan.
Stop, take some time away from the business (by yourself or with your key people) and have an objective look at what is going on. Do a SWOT (Strengths, Weaknesses, Opportunities and Threats) to fully understand where you are at. Then look ahead at where you need to be. Write this down as a simple statement of where you are heading and what you are trying to achieve. For the „key‟ (you can‟t fix everything at once) issues that you have identified from the SWOT, there will be actions appropriate to help you achieve your aim. Write the actions down and „stick them on the wall‟. Cross them off as you fix them and repeat the whole process again when necessary.
Simple. And it works. The objectivity helps you understand what makes your business tick – and what is holding you back. The action list helps you focus on the big picture. Best of all, you can use this process for anything that isn‟t working. You can use it for steering the business, for focusing management, for developing a marketing strategy, for dealing with a crisis, planning succession or planning your own future – anything.
It can also pay you to get help. An appropriate outside facilitator can help the owner be more objective and provide the technical input that only comes from experience and wisdom. A good advisor can see where a business is underperforming, and incorporate initiatives into the planning process that can bring valuable change. Such change should improve performance and hence the value of the business. And of course, a valuable business is more easily sold and for a better price.
When it comes time to do a succession plan, value is not the only consideration. You need to build on those things that set your business apart from competitors (Competitive Advantages), understand why someone may seek to acquire you (Strategic Advantages) and identify those synergies and benefits that you may bring to a combined group. Even if you are not considering a sale for years to come (you never know when someone might knock on the door), this is a valuable exercise.
In this way, your planning can steer the business towards a future shape that will be far more attractive and valuable in the eyes of an acquirer. And of course, having thought through what could make your business attractive, you then know who the future owner of your business might be. Imagine the power of a casual („accidental‟) conversation at an industry function as you talk about your business to potential acquirers!
All of this is possible when you sit back and objectively look at where you are heading.
Reproduced with permission of MYOB Greentree from their Game On website.