DCF 1.0

“When are you going to sell the business?” your wife asks.

“When we’ve got it ready to sell,” you reply vaguely.

“When will it be ready?” she persists.

“In a couple more years. We have to get sales back on track after a recent setback.”

Your wife sighs, frowns and bites her tongue. This is not the way she envisioned her retirement to go.

Some variation of this conversation is taking place in every town across the country. As a serial entrepreneur, I’m acutely aware that it’s a lot easier to start a business than it is to sell it.

There are so many factors at play, and many of them are out of our control:

  • Interest rates
  • The economy
  • The health of your industry
  • The rate of inflation
  • Tax rates
  • The stock market
  • Interest and availability of foreign buyers
  • Availability of financing

All these factors can have a huge impact on the timing and value of a business sale.

Then there are factors that you can control, but they take time and a deliberate plan to nail down:

  • The quality, quantity and duration of your client contracts
  • Revenue and year-over-year increases
  • Profit percentage and total annual profits
  • Bench strength of your employees
  • Quality of your leadership team
  • Bench strength of your advisory team
  • The documented processes, policies and procedures
  • The shape of your financials
  • Track record of your business
  • The story you can tell about the future
  • When you want to sell
  • How many buyers are interested

There are other factors to consider too:

  • What do we tell our employees, and when should we inform them that we’d like to sell the business?
  • Who can we trust to broker the deal? What will that cost us?
  • Will we be able to sell the business for as much as we need for our retirement?
  • What will we do with ourselves if we don’t have the business to run?
  • If we put our energies into finding a buyer, will the business suffer when we take our eye off the ball?
  • How much passive income do we really need to retire? Could we keep the business going and just take more time off?

The questions could go on and on. But how do we deal with all them and still try to answer our spouse’s simple query: “When will you sell the business?” While you and the business have been good family providers over the years, she fears that circumstances can change quickly and a profitable business can just as easily lose money. She knows that many companies go bankrupt, and she doesn’t want to end up owing money to creditors. Especially when she’s retired.

While it’s difficult to predict the value you can expect when you sell the business, like any exercise in goal-setting you have to look into the future, draw a line in the sand, make a commitment and begin moving determinedly toward that goal. Without setting a date, developing a plan of action and committing to make it happen, anything you tell your spouse will be a wishy-washy dream that will never get off the ground.

So let’s get started. First, articulate the goal:

“We have turned our business structure into an Employee Share Ownership Plan (ESOP) and transferred ownership to our employees so they can carry on the business successfully. I have most of my capital out of the business and invested in a diverse portfolio. I can be relieved of my duties but still receive an income as the chairman. Deadline: May 1, 2016.”

Next, you’ll want to list the benefits of making this happen. This becomes your motivation: the reasons you strive to reach this goal. Not the least of which is the preservation of your marriage.

Don’t forget to list the obstacles that could get in your way: employees resistance to change, your own habits and lifestyle, all the items on the Due Diligence Checklist that are still to be done, low profit margins, etc.

Once you know what the issues are, develop a list of actions that you need to take in order to deal with them, with deadlines for each. For example:

Action Deadline
1 Get a Due Diligence Checklist and begin to prioritize each item. April 1
2 Talk with my spouse. Make a commitment. April 8
3 Read up on ESOPs and contact someone who can help me put together the plan. April 21
4 Develop a strategy for increasing our sales and our margins. April 15
5 Find others who have developed an ESOP in their company and learn from their experience. May 15
6 Meet with my financial advisor to clarify my retirement needs and how best to meet them. May 21
7 Speak with my accountant to develop a reasonable approach to minimizing taxes. June 1
8 Get a business coach who can help me stay on track and navigate through this jungle. July 1

Once you have documented the goal, set a deadline, brainstormed the benefits and challenges and listed the actions with timelines, there’s one more step. Looking at everything you’ve written, knowing the rewards and the price you’ll need to pay to get them and ask yourself if it’s worth it.

If yes, then make a commitment. Consciously decide that you’ll do whatever it takes.

At that point, you’ll be ready to give your wife an answer to her question.

Wayne Vanwyck is the founder and CEO of The Achievement Centre International in London, Ont., and Callright Marketing Services in Kitchener, Ont. He is the creator of The Business Transition Coach Forum, the author of the best-selling book Pure Selling and his recent book The Business Transition Crisis: Plan Your Succession Now and Beat the Biggest Business Sell-off In History. He has been training and coaching business owners for the past 28 years.

More columns by Wayne Vanwyck

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