How to Improve Small Business Evaluations

How to Improve Small Business Evaluations

How to Change the Valuation of Your Business

Developing an Outcome Driven Strategy

How Do We Define the End? (Part 2 of 4)

What is the ‘End’?  Is it money?  Is it recognition?  Is it a feeling of accomplishment?  Is it a transition to doing things you’ve been putting off for decades because of the demands of owning and running a business?

It could be any, some of, or all of these things and more.  What’s important to improve small business evaluations is that you have a clear idea of what ‘End’ you want.  As I mentioned last month in my post on ‘Processes for Coping with the Emotional Barriers’, if we don’t really define clearly what an ‘End’ should be, we risk putting ourselves in a situation where we become paralyzed and fail to take any action!  This leads to our ‘Ends’ being dictated to us and that almost never is a situation that is going to leave us happy.

I believe some ‘Ends’ are easier than others to figure out and tell my clients to start with them.  Generally speaking the financial ‘Ends’ fit in this category.  Figuring out budgets for post-ownership life, the kinds of expenses the business use to pay for and now will be paid personally, additions for things like travel or gifts to family.  All these can come from your existing financial information.  Working with Financial Planners can give you some well-needed objectivity and insight into expenses you might not have anticipated.  All of this calculation will lead a defined ‘End’ – the amount you need to get from your business to fund your post-ownership life.

The desire for legacy is an important ‘End’ to consider.  If it is on your list, it will have a significant affect on the strategies available to you.  Other ‘soft Ends’ that can have a significant affect on strategies include:

• Desire to keep working
• Desire to eliminate risk
• Feelings about partners and employees

‘Ends’ can require strategies that may conflict with one another.  This can be a great source of conflict and frustration to owners resulting in their making no decision at all!  This is the worse possible situation.

When you’re considering your ‘Ends’, consider just how important each is.  Are there some that are more important than others?  Being able to rank your ‘Ends’ allows you to make compromises and get out of frustrating situations that paralyze you.

How to Improve Small Business Evaluations

How to Improve Small Business Evaluations

How to Change the Valuation of Your Business

Developing an Outcome Driven Strategy

The End Comes First (Part 1 of 4)

Improvisation is a wonderful skill.  I’m a pretty good improvising cook.  I have friends who are good at improvising a story or music.  However, I don’t know of anyone who could improvise the construction of a building.  What’s the difference?  Why can’t we have an improvising general contractor?

It comes down to differences of scope and scale.  Even the improvising cook is probably not going to improvise a major banquet for a thousand people.  Likewise the builder might improvise handling some aspect of a building project but will require blueprints – a plan that defines the very specific outcome desired – for the entirety of the project.

Owners understand this intellectually but it is hardly how they typically manage the overall direction of their business.  Ask an owner what their overall goal for their business is and you will most likely get a vague answer about wanting to grow and wanting to sell their business some day.  That may do alright for getting by day-by-day but it is hardly the type of thinking that will really change the value we might achieve for our business.

To do that we have to use ends driven planning.  In my next three installments, I will be discussing how we define the ends themselves in a practical way, how we build a strategy based upon our defined ends, and how we make these strategies actionable so we can achieve the results desired.

Small Business Succession Planning Strategies

Small Business Succession Planning Strategies

Transferring Ownership to Financial Independence

Selling-Succession Methods versus Emotional Needs

Specific Emotional Challenges of Selling and Succession (Part 3 of 3)

One of the things that one finds when one decides to specialize in consulting owners on selling and small business succession planning strategies is it is not a simple process.  In fact to get the best results, a lot of different disciplines need to be integrated.  The best succession-selling consultants act like a systems integrator/general contractor bringing the various expertises necessary for success to the client and coordinating them to get the optimum results.

I bring this up because in this post I am going to refer to the work of one of my fellow experts, Jacqueline Gould (switchinggrears-retirementlifestyle.com).  Jacqueline specializes in assisting people go through the process of redesigning their life as they come to the traditional age of retirement.

The key to dealing with the emotional issues that sidetrack our selling-succession goals is figuring out what we are going to transition to…what the next phase of our life is going to be.

Here are some of the thought processes Jacqueline recommends for going through this transition.

• Study and gain understanding of what your vision, values, interests and strengths really are.
• Understand how your vision, values, interests and strengths might shape your future, post ownership goals
• Recognize your professional and personal interests and align them to your life roles and goals
• Take inventory of your capabilities
• Define your desired contributions and the impact you would like to create (what you want people to know you for)
• Identify the feelings you want to have as a result of your transition vision
• Develop a new purpose – Values + Strengths + Passions + Service = Your Purpose

Jacqueline has developed a process and tools that you can use for going through this exercise and she can be reached at Jacqueline@switchinggears-retirementlifestyle.com.

Some closing remarks; having been going through my own transition over the last few years, I can tell you even if you are aware of the issues, doing this transition work is really hard.  I would not have been successful in getting the breakthroughs I’ve gotten if I didn’t have trusted advisers helping me.  Yes, even I, the transition professional, could not do this on my own.  I needed third parties who could act as guides and provide objectivity.

My advice to you is if you want to have the most successful ownership to financial independence transition is to do likewise.  Get help.  Of course I would love to help you in that.  It’s my profession and if you’d like more information on my services contact me at michael@podolny.com.  But more importantly find someone who is a competent professional with experience and empathy.  Retain them.  Make a commitment and do it.  Start the process of thinking through what your future will be.  It’s the only way to get the kind of outcome that makes owning a business really worth it in the end.

Surprise Succession Planning Process Pitfall

Surprise Succession Planning Process Pitfall

Your Succession Planning Process may be doomed to fail if you haven't addressed this issue head on.

This brief video shares the true life example of a business owner confronted with the #1 surprise succession planning process pitfall, and how she and her husband were able to overcome it.

http://youtu.be/OjGLV-CABdY

Small Business Succession Planning Strategies

Small Business Succession Planning Strategies

Transferring Ownership to Financial Independence

Selling-Succession Methods versus Emotional Needs

Specific Emotional Challenges of Selling and Succession (Part 2 of 3)

 This month we’re looking at the emotional component of small business succession planning strategies. In other words, implementing a plan for transferring ownership to financial independence.  Financial independence means that we have income that does not require us to work.

I’m going to assume that you have not been putting money away all along while you’ve run your business because the majority of owners don’t.  Therefore, to get financial independence we either have to convert our business into liquid investable assets (selling) or we have to turn the business into something that can run without us but still provide us with income (succession).  Each of these paths has its own emotional issues.

When we’re selling, we are talking about a clean and clear break from our business.  This means totally revising how we live our lives.  No more going into the office.  No more meetings.  No more people problems. No more recognition of one’s place as a business owner.  No more being a member of a particular business community.  No more anything that has defined you as a person for the last 20, 30, or more years of your life.  That can be a truly scary prospect.

As the process of selling a business can be a very demanding, if you’ve not thought about what you will be doing in your next phase, you may very likely ‘kill the deal’ at the last moment as so many do.  You’ll do it even if the deal is a full and fair deal because you will be frightened to death of what you’re going to do with yourself for the rest of your life.

When we do succession, the problem is different because there isn’t a nice clean break.  Here the problem becomes one of us allowing ourselves to let go.  It’s definitely a more insidious emotional challenge.

In the sale, it is all or nothing.  In succession, you don’t have to do that.  You can still kind of be there.  You have every opportunity to meddle.  Your emotional ability to trust your successor management will be challenged because they will never do things exactly as you did.  Nothing derails a successor management team more than the owner coming in endlessly, changing the plan, questioning the decisions, and in general not giving the successors the authority promised.  Soon you’re back where you started because the managers leave or you let them go and you’re back running the company.

What do we do deal with these issues?  I’ll discuss that in our next post.