What’s Your Timing?
I was at a holiday party when my CPA declared that I had won the best-timing award for selling my business. It didn’t seem like a prize-worthy achievement until I learned how difficult it seems for most business owners to define their exit date.
You hear things like: “Sell it at the victory lap.” “Get out when you can.” “Read the writing on the wall.” “You will feel it when the time is right.”
But when I talk to successful business owner-sellers who also could have won best-timing awards, I heard things like:
“We knew we couldn’t keep up the growth curve and survive (as humans) so we needed a plan to make us salable in 5 years.”
“I keep a close relationship with the investment bankers so that I know at any time who are the six to eight potential companies likely to buy us.”
And finally, a president of a professional services firm told me “I’m getting tired. When I leave in 5 years we will need new blood, new ideas and energy to run a company twice the size we are now.”
What’s the difference between owners with ‘lousy timing’ and those with ‘great timing’? Those who hope there will be a “sign” and those who plan for the sale based on reality.
It’s advance planning and positioning of your company that allows you to better time your exit and eliminate the stress of not knowing your ETA.
Don’t wait to begin thinking about your timing. The main reason business owners give for not engaging in exit planning is “It’s too early.” It seems that only when the time horizon is less than 2 years do other excuses top the list (a business crisis, for example). Yet 75% of successful owner/sellers will tell you they wished they had begun preparing much earlier.
Ideally, you should count on a three to five year horizon to your departure. Then you have more options and the time for increasing the value of your company, minimizing tax liabilities, building sustainability, and providing for your and your family’s future.
Increase your insight into your timing by thinking about the following questions.
The first three are a reality check on your business; the second three are about YOU:
- What is the economic forecast for your industry or technology? What do the experts say; what does your gut tell you?
- What is your ‘No Delusions’ forecast for your company’s value and saleability within your market/industry in 2 years? 3 years? 4 years?
- What current data let you know the market and potential buyers for your business?
- What is your energy level (physical and mental)–fading or stable? What’s going to be required of you to a) continue to grow your company b) prepare and sell your business?
- What is your ideal exit — Cut the strings or phase out? Cash out or earn out? Other?
- What do you know (or suspect) are the hopes of the significant others in your life regarding the timing of selling and leaving your business?
By addressing these questions you will know two important things: what’s clear and what’s still foggy in your thinking and knowledge; and the actions you need to begin now to keep you in the driver’s seat and on pace to your finish line.
Let me hear your advice or questions about planning your exit time line.