Happy New Year everyone! 2013 may have come and gone, and hopefully you have found my expert articles helpful in developing your skills and businesses. Now is the time to put these newfound skills into action.
In my last article, we touched on one of the key characteristics of running a successful business; having an exit strategy. It is important to know how you want to leave or end your business from the moment you start up, so you can plan your finances and game plan accordingly.
I recall one business owner whom I met when he was 52; his game plan was to retire at 57, sell the business, buy a property in the Mediterranean, fly south with the birds for the Winter, then come back in the Spring.
We were chatting away and he was asked what the required capital sum was for this retirement lifestyle, and he had no idea. What about pension? Well the business was his pension. Did he know what the business was worth? Again, no idea.
Would it not be a shame, I asked, if in five years’ time he found that the business could not be sold for the capital sum needed, or even worse couldn’t be sold at all, which would mean that he would have to keep working? So I offered to help him create a value business, and fortunately we had the timescale to do it.
There is a time bomb ticking in situations like this, where people sometimes live in a world of illusion, where they consider the business to be a retirement nest egg, when in fact it is worth little or nothing. Certainly it is often not worth what they think it is, and in many cases the value walks out with them!
Successful businesses have figured this out up front and plan accordingly.
There is nothing wrong with a lifestyle business, provided you take out the money wisely. There is not a right or wrong situation; you just have to understand the implications of the way you choose to run it.