Week 7 Black Enterprise Small Business University Creating an Exit Strategy Course Review by Lashana Thomas
Course: Creating an Exit Strategy
Lesson 1: HOW TO
CREATE AN EXIT STRATEGY
Just revving up or about to retire, you need to know what
the plan is to transition out of the business and help a new leader transition
in. Lynette Khalfani-Cox a personal finance expert and founder of Ask the Money
coach.com, is teaching a course on The Exit Strategy. Review the first lesson
on How To Create Your Exit Strategy and get your business in order.
Every business owner needs an exit strategy; this is true
for the startup entrepreneur, part-time entrepreneur, long time business owner,
or the serial entrepreneurs. An exit strategy simply put is your game plan for
when you leave a company, sell it, or disband it. An exit strategy also helps
you plan ahead, in the event of a death, disability, or a divorce, or anything
else that would affect your operations. You don’t have to be running a multi-million
dollar company or have lots of employees to require an exit strategy. Even if
your venture is a sole proprietorship or two person operation, you should give
careful thought to you and your businesses future.
An exit strategy
plays a crucial role in these matters. The harsh reality is that most small
businesses don’t last more than a year and even those businesses that do
survive often struggle for years. No
matter how much hard work you put into building your business, there may come a
time where you have to pack up and walk away.
But that doesn’t mean you can’t maximize the return on your investment.
You can exit gracefully and do well financially by crafting a good exit
strategy, start by figuring out what you want to happen. How do you want things to unfold? Will you be
liquidating assets, or selling off parts, or all of your business. If that is
that case, how much is your business worth in total or broken down into parts?
If you want to be acquired by a bigger company or even a competitor, are you keeping
good financial records for a potential buyer? If you plan on running the
business until you retire, perhaps, your game plan is to pass the business
along to a family member, make sure anyone you have in mind, will truly want to
take the reins of the business. Not everyone wants to run a business, even if
the enterprise is doing very well.
So no matter what stage your business is currently in, or
how its fairing economically, remember these 3 tips when forming an Exit Strategy:
1. Consider all possible exit strategies apart
from selling. Think about a merger or passing on the business to a family
member or trusted employee.
2. Groom another leader. Too often leaders
fail to groom other talented individuals to replace them, but if your exit
strategy simply involves only you moving on, but the business remaining to
operate, you need to hand pick a successor.
3. Consider the impact on others . At some
point in the future you might be fine leaving the business how would your
departure affect employees, family members, and customers, For example, if
relatives gave you loans to start your business, plan for how you will repay
them or cash out any equity they may have in the company. Likewise if you have
a loyal team of employees who have been with your company since day one,
consider how shutting down or selling off will impact them. Do what you can to
protect them that have protected you along the way.
In the end having a proper exit strategy can be liberating.
When you’re ready to retire, sell, or simply move on to the next big thing, an
exit strategy can give you freedom to do just that.
Lesson 2: WHO TO TRUST WITH YOUR BUSINESS
It’s a tough choice but it’s a must choice—knowing who
you’re going to trust with your business. In lesson 2, Lynnette Khalfani -Cox
tells you all the pieces to consider when making that important choice. Who to
trust with your business?
There comes a time when every business owner starts thinking
about moving on from his or her business, maybe you’re approaching retirement
age, the business has become all consuming, or maybe you just want to move on
with other projects. If the business is continued, who can you trust to keep
the business going? This is a heavy question especially since most of us
entrepreneurs have invested heavily into our businesses, financially,
emotionally, and time wise, so here is what you need to know about finding the
ideal person to trust with your business.
If you have family members that are employees of the
business, or just business savvy, one option is to pass the business on to
them, but when you’re considering relatives like a sibling, or a child, it’s
important to look objectively, at their talents and readiness for the job. They
should have the maturity necessary to take the reins, they should also possess
the leadership skills, and the temperament to lead your business, and equally
important, running your business should be a role they would relish and not
just accept out of obligation or pure financial needs. Family dynamics should
be partially considered. Will naming a certain person to replace you set off a
family feud, that kind of drama could taint the business, cause family
in-fighting, or jeopardize customers relationships. So think long and hard
about whom you name and how to minimize potential disruptions.
Don’t overlook opportunities to sell off the business to
someone else outside the business, or to bring in and outside person to run the
business. If you have a business partner or a key employee who already knows
your business well, considering grooming them for the job. Many small business owners are surprised to
learn that even competitors or other companies sometimes make good options,
when you are deciding whom to trust with your business.
Ultimately consider these 3 tips when deciding who to trust
with your business:
1. Consider
in house talent first. An existing business partners, colleague, or even an
employee may be your best bet. You could
possibly work out a deal, where you could be an advisor or a shareholder, but
you would be completely hands off, as far as business operations are concerned.
As a silent partner or shareholder, you could retain certain voting rights and
still benefit financially from the ongoing success of the business.
2. Don’t rule of the competition. Being acquired by your competitor or
another company can also work in your favor, when you exit a business. You may
get a hefty payout for the sale of your company, plus if the acquiring company
shares your vision for how you want the business to continue to grow, that
helps ensure the viability, and the long term success of your company.
3. Learn to let go. Coming up with an exit
strategy can be one of the most challenging parts of business planning, because
it’s not always easy to think about the idea of letting go of your business.
But don’t fall into the trap of thinking that you can’t trust anyone or
any company to take over your business, that’s a short sided approach and
probably not true.
So before time changes start
thinking now about an appropriate successor. Picking the right person or
company is a vital part of your exit strategy.
Lesson 3: HOW TO
ENSURE THE COMPANY LIVES ON
You’ve put your heart and soul into building your business,
now it’s time to make sure your legacy lives on. When you’re moving on from your business or
planning your transition, you may not want the company to simply end when you
leave. Think about taking the right steps now to ensure that your company
outlasts you, maybe even, outlives you.
Consider using these tips to ensure that your company
thrives long after you have walked away:
1. Create a
succession plan for your business.
This involves more than just picking a future leader to replace you.
It’s also about making sure that everyone impacted by the business is taking
care of in your absence. So your succession plan should take in account, needs
and concerns of employees, customers, and even your vendors and suppliers.
2. Think
about your company’s brand and what it stands for. If you’re known for
delivering unbeatable customer service, how can ensure that philosophy endures.
One way can be to write specific policies and procedures that reflect your
vision of what the company is and should always be.
3. Be
willing to accept change. Recognize that after you leave, some things will
inevitable be different. Sometimes
change can be good, as long as the underlying strengths of a business remain
intact.
No matter how much time, energy, and resources, you put into
building your business, there will come a time when you will move away from the
company. Whether you decide to retire or sell off a business to a competitor or
a colleague, doing it the right way, can help you establish a personal legacy
and a business legacy too.
You can sure a smooth transition by focusing on
these 3 strategies to help your company live on:
1. Make a
succession plan now, not later. Look at your existing roster of talent
within the business and think about who could run the business after you’re
gone. If you don’t have a partner, employee, or a family member who can be up
for the task. Look outside your immediate network. A savvy executive at one of
your competitors might fill the bill or a company you now consider as
competition might be the very business to take over your operation and keep it
going.
2. Strengthen
your vision. Do you have a crystal clear vision and purpose? If you don’t
have a clear vision in mind, you probably can’t share it with your employees,
business partners, relatives, or others who might carry on the business. Make
sure everyone is inspired and dedicated to work towards your vision. This will
allow you to build a company that will have strong sense of purpose and
direction for the future.
3. Clean up
your financials. Make sure finances
are in order to make sure that your business can continue to grow and build
upon its previous successes after you depart.
If you’re company keeps running into cash flow problems, tax
difficulties, or other they’re money issues, work at fixing those problems
immediately. Your company won’t survive if your financial side is a mess.
Take
the time to clean up the financials and instill some solid processes for
managing cash flow, so that your company can continue to thrive for years to
come.
To learn more about The Black Enterprise Small Business University series visit
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