Every day when you go to work, your intent is to get more jobs in, finished, and out the door. At least as often as once a month, shop owners typically reconcile their books with the bank’s numbers and review their profit-and-loss statements.
That’s good, but to prepare for your smart exit, you need to do more… much more. On any particular day, you could post a “For Sale” sign and sell “as is.” Or, like selling a car, you could wash it, change the oil, and give it a tune-up, then advertise and sell it for more.
You can do “For Sale by Owner” or get help from a real estate agent, business broker, or consultant with specialized ownership transfer knowledge. In large organizations, this process is called mergers and acquisitions.
Here’s the 4-step method for successful small business transfer I’ve developed:
- Deliver Customer Delight — Grow an efficient venture that delights your customers.
- Teach Staff to Steer — Train and develop your staff to operate and steer the business, based on written policies and procedures. Identify new leader prospects. Support leader candidates: Who wants it most?
- Implement Financial and Management Controls — Monitor company performance, keeping close rein as staff and the new leader(s) practice with less of your direct involvement.
- Make Your Smart Exit — Smoothly and gracefully transfer responsibilities, leadership, and ownership to make a smart exit and go on to your next opportunity, enterprise, or retirement.
My list of the tools and machinery needed to achieve these steps includes:
- Daily update the sales and purchases in your shop management and accounting software. If you have a bookkeeper, great, but you need to understand your accounting and be able to operate it to hire, train, evaluate, and know when to terminate bookkeepers. It’s your money and no one will manage it better than you. Get help with finances, but don’t abdicate your responsibility.
- Compare bank activity to your accounting and reconcile every few days. If you maintain a large cash balance, you can reconcile monthly. It’s a “red flag” if you’re using the bank’s figures to evaluate your cash position and make management decisions.
- Categorize transactions in your books with a carefully designed chart of accounts. Make major accounts in direct line with tax return categories and sub-accounts for management analysis.
- Set your target smart exit date and dollar. Then establish milestones from today toward those targets. Depending on your business and personal life, consider defining three to 10 milestone achievements.
- Conduct scenario planning with probable, best, and worst case projections for this year, and a few future years toward your first milestone.
- List ideas to improve and sustain your business this month, quarter, and year. Use project management methods with these initiatives. Get input from staff, your spouse and possibly support from family or a close friend. Create a strategy for how you’ll achieve that first milestone with dates and actions using text and numbers. Have a plan A and B. Test which works best, then take the next step and repeat with a new plan A and B. Dig into your business model description, clarifying the value proposition your shop offers.
- Itemize your tangible and intangible assets, liabilities, and obligations for an explicit understanding you can share with your spouse, key staff, and new leader candidates about ongoing commitments they need to fulfill to stay in business. These spreadsheets can assist you in estimating the value of your business.
- Ask your accountant or tax preparer what they know about business valuation and tell them the value you estimate. Search for shops for sale or ones which have recently sold that are similar to yours. Develop trust relationships with experts to assist you.
- Each year, declare the value of the shop and your evidence to support the claim. Every three to 10 years, hire a certified valuation expert.
- In all that your firm says and does, communicate your vision, mission, purpose, culture, brand, and the “why” of what you do.
- Engage and develop a team of supporters, stakeholders, customers, and employees to build and document your fulfillment process.
- Develop win/win written agreements with vendors, employees, and stockholders to fulfill your promise to customers. Build trust and confidence in all your relationships.
Does this sound like a big project? It is, but you can do as much or as little as time and resources allow. How much are you depending upon the proceeds from selling your shop to augment your savings and Social Security?
What would you like in net sale proceeds after taxes? What’s a wise level of risk for you during the next five to 20 years? Learn more at the Smart Exit Workshop, Sunday, October 22 at this year’s Powertrain Expo. Read the book Smart Exit: Steer Your Business to Success. Complete the Smart Exit Companion Workbook exercises in the book or using the Smart Exit online app.
We’ll show you how you can learn, practice, and perfect your methods, to improve your business value and transfer leadership for your smart exit.
If you make the sale of your business a one-person project, you’re missing the point!
I believe the best way most shop owners can convert their many years of effort and tens of thousands of dollars invested is as a team project. There’ll probably only be one or two new leaders who earn an ownership interest and replace you, but maybe there’ll be more. Regardless, it’ll take the whole team’s dedication to the new operation going forward.
ATRA and industry experts can give you a national and international perspective on what’s possible for your future and the future of your firm.
Your experience, education, and use of specialized tools contribute to you being a transmission expert. Likewise, there are management experts with business experience and education who use specialized tools to assist business executives, corporation officers, and majority stockholders in ventures large and small.
I suggest you plan to step away gradually. Be ready to jump in when needed to avert disasters. Watch and help when called upon as the new leader(s) and team learn to navigate in our rapidly evolving economic, cultural, and technological environment.
Remember, business value is influenced by both increasing profit (assets) and reducing risk (liabilities). Blueprint your operation for your smart exit.
John E. Anderson will be speaking at this year’s Expo. John is a longtime business coach who helps business owners evaluate their businesses, adjust their operating practices, build a strategic plan and make a Smart Exit™.
In the coming issues, John will discuss some of the strategies he’s developed. He’ll show you how to turn your business around, so you can answer the three questions, and ultimately, find a smart exit that works for you.
Post your questions and observations on the ATRA Forum. A CEO Circle of shop owners is forming to discuss these topics leading up to the EXPO. Email ATRA for further information firstname.lastname@example.org