Business owners are braving many tough challenges in the era of COVID-19, and the future may look and feel like a large question mark, at the moment.
Right now, business owners like you have a lot to focus on to keep your organization running. Thankfully, there are many new government programs aimed at helping you during these uncertain times.
So why consider exit planning, if you are not preparing to sell your business right now? This is common thinking, but exit planning is not about being common: it is about being exceptional, smart and forward thinking.
Your company is likely working on adapting to the market’s current conditions, and in doing so, you are taking a fresh look at your business operations. You are hopefully finding new or more-efficient ways to conduct business and streamline operations, so your organization keeps running at a lower cost.
This process allows you to take huge strides in exit planning. As you retool and reengineer how you run your business, document every change and every improvement you make, and record the result of these changes.
Why is this documentation important for exit planning?
- Documented changes demonstrate your new-and-improved and efficient operating procedures that continue to help the business save money.
- These records also show a future buyer the specific changes you implemented to emerge as a stronger business.
- As a result, you created value in your business that did not exist before you made hard, but necessary, changes during COVID-19.
- Most importantly, these documented procedures are now your operating manual and the playbook for your business. This is something potential buyers want and need to have when considering a purchase.
How does this create value in your business?
By documenting your new business processes, your organization becomes a turnkey operation based on successful procedures, instead of a business that is dependent on specific people. A buyer can identify the procedures in your playbook, and feel confident they can run the business in the same manner and be assured of sustained success after they acquire your business.
Because you transitioned your business into a process-driven company, and you added value to your business through transferrable, documented processes, you can expect buyers to pay a premium for this type of turnkey operation.
If your exit plan does not involve a third-party sale, but instead includes a transition to employees or children, an economic shift is a unique opportunity to provide the next generation with a priceless experience. You learn the greatest lessons when challenges arise, and knowledge is acquired when tough decisions need to be made. By bringing the next generation to the table during a time of economic uncertainty, difficult decisions, risk assessments and operating procedures changes, they can learn, grow and emerge from the process as stronger future leaders. This experience can give them a greater chance of success after the ownership transition takes place, because they can know how to act quickly during uncontrollable circumstances.
Furthermore, similar to preparing for a sale to a third-party, these employees or family members can have the greatest chance of success with your new playbook of documented procedures that came during a time of change.
Exit planning is not about preparing for an immediate sale. Exit planning is about making certain your business is ready for sale at all times, so you can exit when the time is right for you.
If you have not started exit planning, now is a very smart time to begin the process, as you look at how you do business, make the necessary changes to meet economic shifts and thoroughly document the your business processes along the way. This is where smart exit planning begins.
Rich Gunn leads BPM’s Value Acceleration Service Team, which helps with succession, transition and exit planning for business owners. Rich is a Certified Exit Planning Advisor and a member of the Exit Planning Institute.
The Business Owners’ Special Series (B.O.S.S.):
The Business Owners’ Special Series (B.O.S.S.) is composed of several informational articles for business owners who are proactively seeking guidance from experts on how to implement value acceleration in their business. Be sure to keep reading, if you desire to develop your business to its maximum potential value and gain an understanding of how and why beginning the process sooner results in building greater value.