Three Steps to An Endless Summer

Summer is coming and that usually drums up memories of long relaxing getaways to the beach or mountains, time with family and friends, and freedom from the demands of a business…even if for just a few days. If that is starting to sound more and more appealing, it might be time to take a serious look at bringing on a motivated successor. This does not mean your exit is imminent, it simply allows you some additional flexibility to evaluate who you might invite to assume more management and leadership responsibilities, and when you might be ready to reduce your level of responsibility in the business and create your endless summer. Ultimately, it gives you the opportunity to evaluate your timeline and confidence in an exit strategy.

First - Who?

The usual suspects include family members, key employees or third party buyers. But your business isn’t ‘usual’. For your business, you need to consider what matters most to you. If you want the business to provide for your family, you have to realistically consider whether the family member(s) has the skills and experience to run the business profitably and sustainably. Are they motivated enough? Can you afford the options on a ‘sale’ to the family member and still fund a retirement lifestyle that meets your personal needs?

If you want the business to benefit your key employee(s), you have to realistically consider whether they have the skills, experience and motivation to run it? You also have to figure out what a ‘sale’ to them will look like and whether you can afford to do it.

Financing your Endless Summer

Most business sale transactions occurring between owners and family or key employees will be financed, in part or whole, by the owner. And, these are the most complex and challenging transactions to work through. Why? Selling your ‘baby’ to family or loyal employees is so emotional. Your deep connection to them is what makes the sale so gratifying and yet for the transition to work for all, it requires you to let go and accept a different leadership model. It’s easier to do that with someone you are not emotionally connected to. Are you prepared to release the reins over time, while financing their strategic direction?

Building Value: your Endless Summer

If a third party buyer is the best option for you, you need to build your strategy now. This is the most time consuming of the three options because you have to find them, negotiate and then sell. Starting now allows you to test interest, seek prospective buyers, and get feedback on the value of your business to a third party. We know it’s valuable to you, but what will someone else pay for it? With that information, you can choose to invest another 2 – 5 years or even 5 – 10 years, to make the timing and valuation of your business sale work for you.

Is it time for Your Endless Summer?

You’ve invested in your business. Now invest in your life. It’s your time.

Buying a business is tough! Selling your business is tougher!

As you may know from my newsletter, I’m a trend person. I love reading about demographic trends and the impact on our culture. So reading about the coming tsunami, as the first of the baby boomers turn 68 and the last boomers reach the milestone half century, it’s like being in a candy store for me! What does this have to do with buying or selling your business? Well, I’ve been doing a lot of research on how those trends matter in the business world, and what I’ve found is that six (6) to eight (8) million businesses will change hands in the next 9 years as boomer owners exit their business. How they exit their business is where it gets really interesting. According to John Leonetti,  author of: Exiting Your Business, Protecting Your Wealth :A Strategic Guide for Owners and their Advisor, seventy-five percent (75%) of business owners want to sell their business, but only 20% actually sell. The implications of this are grave for many boomer owners because the majority of their net worth is tied up in their business, and thus, the majority of their retirement funding, too.

Barriers to a sale

What to do? Well, you can begin with a business valuation, to get a sense of what your business is actually worth…not what you hope it’s worth.  In a recent Wall Street Journal article ‘Stick Around After the Deal’, by Lisa Ward, one of the biggest barriers to selling your business is finding a buyer with the ability to get financing.  Most buyers don’t have a wad of cash sitting around waiting on the purchase of your business.

So now what? Seller financing! Yep! That’s you. You are the bank, providing the loan and the buyer pays you back over time. Sure, there are risks with that, but according to a BizBuySell.com  survey, ‘over 90% of business brokers consider seller financing to be either critical or important for getting a deal done’. Ward goes on to say, ‘In this economic climate, sellers willing to finance the sale can often get a faster sale and a better price than they would have gotten if they waited for a well-funded buyer’.

The advantages of seller financing? Rather than liquidating it, or disposing of it in a fire sale, you get to sell your business, for money! In addition, you may want the opportunity to stay engaged in the business, in some capacity. This option can provide that to you as a standard part of the contract.  And, if the buyer defaults on your loan, you can activate your loan agreement default clause, returning the business to you without going through a lengthy and expensive court battle. The only problem with that is…you get the business back! If you wanted the business back, you probably wouldn’t have tried to sell it in the first place!

Don’t Get Derailed

What that means is …  if you are going to seller finance, you are really making an investment in your buyer. You are counting on his or her ability to run the business profitably and sustainably so there is cash to pay you back! So what will it take to ensure that? You need to seek and select a qualified successor that has the competencies and skills to run, grow and deliver profit and cash flow. Will they be ‘perfect’? Doubtful. But they may have the ability to grow into ‘pretty good’ or even ‘great’! Without securing someone you have confidence in that can deliver, you have no return on that investment.

Ask us about our assessment tools to help you qualify your successor(s).

Get Started

Starting early is key. Building an intentional process to qualify and develop your candidates will go a long way towards ensuring your identified successor is a viable successor. It can take 3 – 5 years or more to instill the level of experience, skills and confidence required to run your business profitably. It’s time to get started.

When Talking Isn’t Enough: How To Hold An Engaging Conversation

What would you say if I told you to quit talking to me? In fact, I want you to quit talking to everyone. What I want instead is for you to engage with others. Engagement occurs on a different level than talking to or talking at someone. When we engage, we transform our experience of ourselves and our experience of others. Let’s look at three levels of conversation and discover what it means to be engaged.

3 Levels Of Conversation

Level 1: Level 1 conversations are about exchanging stories. I tell you about my day or week and you respond with your own story that complements, outdoes or reminds you of mine. Sometimes the intent is to validate you and your experience, as in, “Oh my gosh! The same thing happened to me!” Other times we go for the attention grab: “Oh, that’s nothing! Listen to this.” While rich in information sharing and often energizing, Level 1 conversations don’t require a high level of emotional engagement.

Level 2: Level 2 conversations circle around common interests or beliefs. We hash out the latest political scandals or vent about work. In these conversations, each party seeks commonality and support of their worldview. For this reason, Level 2 conversation frequently morph into advice-giving sessions. However, engagement begins as we tap into our core interests and beliefs in these conversations.

Level 3: Here’s where the real work gets done. In level 3 conversations, we are discovering—and appreciating—the uniqueness of the individual. These conversations have more depth, more vulnerability and require deep listening for thoughtful replies. It’s not enough to share a story, though a story might be exactly what is needed to communicate understanding. It’s not enough to discover common interests or beliefs, though we likely will. Instead, we go further and make a commitment to listen and create a safe environment for others to share who they really are, rather then the person we want them to be.

Not every conversation needs to be a Level 3. In fact, that would be exhausting! A quick round of stories at the water cooler or a lunch date to gripe about the boss is fine and often all that’s needed. But look for opportunities to hold Level 3 conversations. It may be with someone you’re mentoring, with a vendor or client with whom you seek to establish a relationship or with a colleague you feel has ideas and opinions—even if they differ from yours—worth exploring at a deeper level.

These conversations take work. It’s hard to let go of judgments or stop our minds from racing to what our reply is going to be and instead be fully in the moment and listening to the person in front of us. In the long term, however, Level 3 conversations are where the deepest of friendships and business relationships take place and grow.