Where do you see yourself in five years? Ten? Twenty?
If you're in the throes of building a new business, your answer might be simple: You just want to be profitable. But once you've built a successful business, how often do you really think about its future? According to some statistics, most small-business owners lack a succession plan. As many as 42% felt they were too busy to plan, while 44% thought their exit was too far in the future to plan it now. Even worse, 47% of respondents 65 years or older had no plan at all.
This means small-business owners aren't thinking ahead—at least not long enough to imagine when they'll leave their businesses.
But the process doesn't have to be scary. It can be one that empowers you to create a more independent, self-running business, even if you don't plan to exit it anytime soon. Here's what you'll need to know.
First, Face the Reality
The first step to creating an exit strategy for your business is to build a business that can largely function without you.
This is the scary part for many business owners. Maybe that's why 78% of business owners said they think about their companies too much to make future plans at all. In some cases, being too busy can be a good thing. But in other cases, it may be an excuse to avoid thinking about the inevitable: The company will go on without you.
Fortunately, you can tackle it one step at a time:
- Create the succession plan, just to have it in place. This is the cornerstone for the future development of the business "exit strategy."
- Identify the talent that's capable of taking on more work. If you have a successful business with other employees, it's fair to say you're not doing it all yourself. There are likely talented people who can take on more responsibilities than they currently have. The time to prepare them for a future without you is now—while times are good—to avoid unpleasant emergency situations in the future. You should teach them the ropes of running a small business from your experience, including the lesser known tactics like equipment loans, inventory loans, and other nuanced means of financing the business.
- Ask for help. If your company is large enough to afford a succession consultant, plenty of talented companies out there can help you every step of the way. Just as you hired your first employees because you couldn't do everything yourself, it might be a worthwhile investment to hire outside help in drafting a succession plan.
Create a Company with a Buoy
If you've ever saved enough money to create an emergency fund for your personal finances, you know the value of having a buoy. It can give you tremendous peace of mind knowing there's a buffer if you ever fail to generate income.
It should work the same way with your business.
It's easier for you to leave a company when you know it has a plan for the future, even if there are unforeseen circumstances such as a dip in your industry or even a global recession. That means giving your company plenty of opportunities to store cash, or having a plan to deal with dips in the economy.
Why It's Important to Plan for the Future
No one's going to force you to exit your company. You built it, after all, and if you retain control of it, you get to say when and how you leave.
But that doesn't mean there aren't benefits to planning for the future, either. Not only will it help you clarify your current mission; it will help you build a stronger company by:
- Inspiring confidence in your employees. If your company has a lot of employees, they deserve to know the company won't fall once you leave it. This confidence will give them more reason to invest their own time and energy into a company with long-term prospects.
- Peace of mind. Writing a will for your family ensures your money goes to the appropriate people after you die. An exit strategy or succession plan for your company accomplishes the same goal. It doesn't require you to exit now; it only helps you build peace of mind for the future.
Don't be another statistic. One day, your business may have to go on without you. If you prepare for it, you'll likely find out that your company is better off—even when you're still there.