It used to be a dirty little secret but has gained a lot more attention over the last decade: many professional athletes go broke after they retire. To the average person this seems impossible. These are people that make millions of dollars per year. They often retire before age 40. And before age 50 we hear about collection suits and bankruptcy. So what happens to these high profile individuals. Often its the same issue that business owners run into: a failure to plan.
Business owners have to plan to exit their business. Either by choice or by circumstance, every business owner will have to retire, sell or liquidate his or her business. Obviously one of these choices is not a very profitable way to exit your business. How do you prepare your business to not only survive your time but allow you to be comfortable after your time in your business has ended?
Many business owners, like professional athletes, never plan that one day they might not be the owner of their business. They often work more hours than anyone else in the business. They wear multiple hats and play many different roles. This works for them and revenue is generated. But when it comes time to sell their business so they can retire, they find it very difficult to find a buyer that is interested or they do not get the value they expected out of the sale.
Can Your michigan business pass the 30-Day test?
There is a very rudimentary test you can run to see if your business is ready to sell. Ask yourself: If I was to leave my business for 30 or more days, what would happen to the business? If you see things like operations slowing down, marketing campaigns not going, decisions not being made, sales falling off, etc. then you are not in a very good position to sell your business.
I have worked with clients that are on the buyers side in the business transactions. I have seen what they are looking for and I have never seen a buyer that is looking to buy a 60 hour a week job. I have never seen a buyer that wants to have to be the head of sales, research and development and the CEO. I have never seen a buyer willing to overpay for a customer list.
As a business owner you need to look at your business from the aspect of a seller. What processes need to be put in place to make your business more appealing? Which of your employees are key to your business and how do you make sure they stay around? Are their potential risks and liabilities that might bite you in the future? Are you too reliant on a few big clients or customers? How protected is your intellectual property or proprietary information?
These are things that can be answered in a very positive way if the right plan is put in place. Some of these things will cut into profits but some will actually increase revenue. Ultimately this plan will increase the value of your business and make it much more attractive to potential buyers. With the market changing dramatically over the next few years, the competition to stand out will be even tougher. If you are not planning for it, your exit will sneak up on you and you will not be prepared.
To find out more tips like this or to sit down for a free consultation with one of The Business Law Group's experienced M&A attorneys, click HERE.