“In preparing for battle, I have always found that plans are useless but planning is indispensable.”
– Dwight D. Eisenhower
General Eisenhower’s point was that the process of creating a plan provides value because it forces the planner to consider (and make provision for) “What if events don’t proceed as planned?” A plan not only provides context and the basis for adapting to new and unanticipated events, it also provides alternatives based on assumptions about goals, objectives and resources that may need revision.
I know that business owners who create business plans are able to react more quickly to new events than can those without.
So do you have a plan for your biggest event … the transition out from your business?
The Pilot and the Business Owner
Unfortunately, without a map and a co-pilot, even the best pilot can come undone when a storm hits and takes the plane off-course. It could even end in a catastrophe.
The same goes for business owners. Without a map (the Master Plan) and a co-pilot (their trusted advisor), when an unanticipated event arises (such as a significant change in the national economy), they shelve their business transition thoughts (and thoughts are all they have since they haven’t created a written plan) and stray off-course from their desired business, financial and personal goals.
Next thing they know, their destination is unattainable, all because they hadn’t properly planned the journey in the first place.
Here's a few cold hard facts …
If the value of a Master Plan isn’t already obvious, let’s look at a few cold hard facts.
First, you are far from the only fish in the sea. As the wave of Baby Boomers (born between 1946 and 1964) reaching and passing retirement age crests, the departures of those who own businesses could result in a glut of companies for sale, driving down valuations and giving new leverage to buyers. Simply put, it may become a “buyer’s market” and sellers, such as yourself, may be forced to accept less-than-ideal prices or terms for the sale of your business.
Second, if you are a Baby Boomer, the generation following you is not nearly as numerous so expect far more sellers than buyers in the marketplace. This too, adds to the glut.
Third, even during boom times not all owners who want to sell their business are actually able to sell. There is quite a lot of variation, even among similarly sized businesses in the same industry. Differentiating factors become magnified and elements that were not that important while you were growing your business can become glaring deficiencies. You need a clear competitive advantage to grow, thrive and ultimately exit on your preferred terms.
Fourth, if your business transition strategy is waiting for an ideal time to exit, such as when buyers are active or markets are good, you give up control of the timing of your exit, how much and the terms of payment you’ll receive, and even the type of buyer. Are you confident that the next boom cycle in your industry or in the economy overall will appear when you need it?
And finally, if your reason for putting “Master Planning” at the bottom of your list is because you believe that until the economy, or your business, improves to a certain level, your time and money are better spent preserving and growing business value. If that’s the case, you need to know that working to create a valuable company, or value enhancement as I call it, is an integral part of any successful Master Plan.
The benefits of Master Planning
The benefits of Master Planning include: –
- preparing you, your business and your family for a successful future
- control over the timing and terms of your transition or exit
- customized solutions and action steps tailored to your transition objectives
- laser focus on the value-building aspects of the business that buyers seek and successor owners need
- time-sensitive accountability for each action step necessary to build value and position the business for the next owner
- benchmark changes in business value, management team performance and other critical factors
Concentrating your effort today on growing business value—either as a discrete project or as part of a comprehensive Master Plan—affects both your ability to sell your company and the price you will be paid. In fact, your value-building plan will be inseparable from your Master Plan.
Bottom line, the process of planning is what I mean by working on, not just working in, your business. Only the planning process sets up the best opportunity to transition out of your business on your terms despite the glut of sellers, dearth of buyers, vagaries of the market and investment world, and the myriad of known and unknown influences on your business.
So why not start now?
You can start planning today by working through a narrowly focused set of top priorities, or by attacking all aspects of the future of your ownership as a comprehensive process. It’s your choice.
By starting a master planning process, you will positively impact your future by systematically addressing unique issues relevant to you and your company.
The information contained in this article is general in nature and is not legal, tax or financial advice. For information regarding your particular situation, contact a lawyer or a tax or financial professional. The information in this newsletter is provided with the understanding that it does not render legal, accounting, tax or financial advice. In specific cases, clients should consult their legal, accounting, tax or financial professional. This article is not intended to give advice or to represent our firm as being qualified to give advice in all areas of professional services. Master Planning is a discipline that typically requires the collaboration of multiple professional advisors. To the extent that our firm does not have the expertise required on a particular matter, we will always work closely with you to help you gain access to the resources and professional advice you need.
Any examples provided are hypothetical and for illustrative purposes only. Examples include fictitious names and do not represent any particular person or entity.
