You have spent decades building your company and making it thrive. You’ve spent time, money, and effort making it the best it can be. Now, you are starting to consider retirement and looking for a return on that investment. You need to find out what retiring executives and business owners can do more for themselves and their companies with thoughtful business exit planning.
Baby Boomer Business Owners Turn Their Eyes Toward Retirement
According to the latest data from the Small Business Trends Alliance (SBTA), 41% of all business owners are Baby Boomers. Born between 1946 and 1964, these executives and entrepreneurs are quickly heading toward retirement. The first of the generation hit age 65 in 2011, and more are starting to consider a sunset to their career every day.
If you are a business owner or executive, retiring isn’t as simple as picking a date and putting in your notice. If you want the company you built to survive and provide appropriate rewards, you need to have a business exit plan based on reasonable expectations and thoughtful analysis. Here are some tips to strategic business exit planning that will keep your retirement from truly becoming the end of your business.
Tip 1: Start Earlier Than You Think
The most important key to success for your business exit plan is giving yourself and the company time to implement it. All too often, a retiring executive decides that this will be their last year in the business. But if you have had a hands-on role in the company, 12 months is not much time for a smooth transition. Additionally, with such a short time frame you are likely not going maximize your company’s value. There are experts who know how to increase your businesses value.
The more complex your business, the more lead time you should leave in preparing a business exit plan. Ideally, you might even start a decade before you mean to retire. More commonly, you should expect your business exit plan to take 3 to 5 years, depending on the size of your company, and the depth of your pool of possible successors.
Tip 2: Guide Your Successor into Their Role Gradually
As the day-to-day captain of your company’s ship, you likely know more about it than anyone else on the payroll. The chances of finding the perfect successor with all the right business knowledge, industry expertise, and professional skills to step in on short notice are slim. If you do find that person, they likely own a competitor company and are looking to take over your business, not run it.
If a corporate buyout is not your idea of a successful business exit plan, you need to cultivate your replacement, building their skills and responsibilities gradually. An executive coach can help you evaluate your top candidates, weighing their strengths, limitations, and potential commitment to the company. Then gradually, with your coach working with you and your successor, you can build the successor’s shortcomings, further develop their strengths, work through the inevitable differences and conflicts, and introduce them to new responsibilities over time. That way when you do retire, he or she will already be doing much of what needs to be done.
Tip 3: Inform Key Employees and Clients of Your Business Exit Plan
Surprise is terrible for business. A sudden change of leadership can make clients and employees worry about their future with the business. Strategic meetings with cornerstone clients will introduce them to your successor in a way that builds their trust based on their relationship with you. Company meetings and strategic plans help employees know that the person in charge won’t be making big changes that threaten their stability. By building in an appropriate level of transparency into your business exit plan, you can ease the concerns of your workers and your customers so that when the change does happen, they will be comfortable that their needs will be met.
Tip 4: Have an Economic Plan for Your Financial Buyout
Retiring entrepreneurs usually play two roles in their business: CEO and stockholder. It is not enough to pick a successor who knows your business, your replacement also needs to have the financial wherewithal to buy you out for a fair price.
In building your financial exit plan, you should work with your company’s accountant, attorney, your own personal financial planner, and a business consultant with a keen understanding of merger and acquisition options. Sometimes, one or more of your trusted advisors will signal that they don’t have enough knowledge and experience with exit planning. There are specialists in law, accounting, wealth management, and executive coaching. They will help you identify options and priorities for the ownership transition including payment terms, transfer of assets and liabilities, and fail-safe conditions in case plans change.
Tip 5: Be Prepared for Sudden Departure
Even the best business exit plan can’t keep you from an unexpected illness or sudden life change. It is said that people occasionally get hit by a bus. No matter whether your plan is to leave tomorrow or in 10 years, your plan should include contingencies for what happens if you have to step away sooner. As a retiring executive, your job should include documenting what you do: your processes, your contacts, even your passwords. That way if you do need to leave suddenly, your successor will have guidelines for how to move forward without you.
Retirement for executives and entrepreneurs is a process. By bringing in an experienced business consultant early, you can create a business exit plan that will maximize your company’s value, protect your organization and your safeguard life’s work for years to come.
David Stanislaw is an organizational development specialist with over 30 years’ experience helping entrepreneurs and executives through business transitions. Through one-on-one executive coaching, David helps small and medium-sized businesses thrive when an owner retires and his or her successor takes over. Contact us to meet with David to begin your business exit planning today.