by Susan Hileman, NWIRC Strategic Business Advisor

You’ve worked a lifetime to build your company, but at some point you will exit the business…voluntarily or otherwise! Does the thought make you nervous? It shouldn’t. Not if you’re running your business as if you won’t be there someday. How can you better prepare for what’s ahead?

Position your company to succeed. Too often owners work in their business, but not on their business. Potential owners (whether children, employees or an outside buyer) don’t want your company if it’s only going to succeed with you in it! Having a solid plan which positions the company to move forward profitability is simply good business. Regular evaluation of benchmarks and key performance indicators (KPIs) will help identify areas for improvement and growth—as well as red flags. The State of Ownership Readiness Survey Report states “Only 2 out of every 10 businesses that come to market actually sell…” So position the company to succeed. Run your business as if you’re going to sell it, even if you’re not!

Understand the value of your business. Many owners, understandably, postpone having a formal certified valuation completed until late in the process. They have in mind a dollar amount for the overall business, but fail to break down that value into key functional components. As a result, opportunities to grow the market value are missed during the final years leading up to a transition. Well before a certified formal appraisal is in order, owners should look to obtain a ballpark of the business valuation. In addition to assets of building and equipment, other value-drivers can and should be identified and a plan developed to improve those with the greatest potential impact. As an example, the IRCs CoreValue assessment tool identifies value-drivers including goodwill, the company’s brand or reputation, obligated orders or contracts showing sustainable cash flow, intellectual property or royalties, a diversified customer base, next-level management, and/or strong financial foresight or controls. From a buyer’s perspective, the risk of purchasing your business is, in large measure, a function of how well the business is run. A buyer might be willing to pay additional funds for potential earnings if there is a significant assurance the ROI is valid.

Consider what you’re going to do with your time once you retire. Baby Boomers often identify their self-worth through their work. As a culture, we are conditioned to feel valuable, contribute, and have structured time. It’s estimated over 68% of business owners work more than 40 hours per week and 32% work more than 60 hours per week. So take some time to really dive into, what will the next chapter of your life look like? Where will you invest your time? Travel? Grandchildren? Golf? Perhaps join the Senior Corps of Retired Executive (SCORE) mentoring other start-up businesses? Begin divesting of your time into other interests while you’re still working. Take the fear and uncertainty out of “what” will happen by being proactive about looking at your options for the next chapter of life.

Have a plan. Too often that’s the elephant in the room. You might say, “Yes, of course I have a plan.” To which I would reply, “Is it in writing? Have you talked to the others involved? Do your key employees know what the plan is? Your children? Your spouse?” We find many business owners have a retirement plan or concept of a plan in their head, but have not fully developed or shared that plan with those around them. The longer amount of time you have to plan, the more efficient the transition will be when the time does come for you to exit your business. And the easier it is to make changes as unexpected situations occur.

Truth be told, a great plan starts about 5 years before you’re really thinking of retiring. Understanding and building the value of your company will position it to succeed—even if your plan is to live forever! The NWIRC can help owners navigate the unknown and prepare for what’s ahead. It begins with a simple conversation.

Susan Hileman is a Strategic Business Advisor at NWIRC. She is a Galliard trained Family Business Advisor, an Innovation Engineering Green Belt, and has degrees in Business Management and Speech Communications from Clarion University.