Why would you be exit planning in a crisis? At the height of the economic expansion (a few months ago in late 2019) I was reviewing a company’s financial statements. Their sales were stagnant, and profits were minimal. When I asked the owner why his business hadn’t grown, he responded, “Well, the Great Recession hit our industry pretty hard, you know.”
Take note that it wasn’t his fault. He was in a hard-hit industry, and the economy dealt him a bad hand. He ignored the thousands of businesses just like his that had grown and prospered in the last ten years.
Once you hunker down behind “It’s not my fault,” it’s easy to stay there too long. First you are glad that you survived. Then you are glad to be making a little bit of money again. Then you wait for the same conditions that made you successful before. If they don’t come, it’s not your fault.
In the meantime, others are coming out of the downturn firing on all cylinders. They used the slow time to get ready; to plan what comes next. When the door of opportunity opened again, they were ready.
Baby Boomers’ Double Whammy
The coronavirus is especially lethal in senior citizens. Many of those are Baby Boomer business owners. They have also suffered a double financial hit. Their retirement account balances are lower, and their businesses, whether closed or just slow, are worth less then they were a few months ago.
Many owners will try to kick the can down the road. “I’ll spend a few years building the business back up, then I’ll sell it.” For some, that was their plan after the recession. Unless you have something new up your sleeve, you may be waiting a long time for the right buyer to come along. In the next economic cycle, you may wait too long. You can only kick that can so far.
If you are a Baby Boomer, the time to be planning your exit is now. That goes double if you are sitting in your house wondering what comes next. Most entrepreneurs started a business because they wanted control over their lives. When there’s an event that takes away that control, your best response is to get it back.
Exit Planning in a Crisis
Your exit plan starts with some basic questions.
- Do I know how much I need to retire, with a professional analysis of my living expenses, life expectancy and inflation assumptions?
- Do I know how much my company is really worth, and who is most likely to pay me that amount?
- If #2 doesn’t meet the needs of #1, do I know how long, and what it would take, to get my business there?
- Do I know all the options for monetizing my business, including a sale to employees, another entrepreneur or professional acquirers?
If you are a Baby Boomer, unless you are exit planning in a crisis, you risk a discussion in 2025, or 2028, or 2031 that starts with “Well. the coronavirus hit our industry pretty hard, you know.”
There is a network of advisors in the USA and Canada who specialize in a reasonably priced, 90-day planning process for small business owners, and who use a suite of online tools to help you work through all these questions remotely. They can help get you started right now.
For a listing of these advisors, go here.
Reprinted from my exit planning blog at Awake at 2 o'clock?
