The Importance of Establishing Goals
“To will is to select a goal, determine a course of action that will bring one to that goal, and then hold to that action ‘til the goal is reached. The key is action.” –Michael Hanson
Philosophers, business owners, and successful people from all walks of life appreciate the importance of establishing goals, creating plans to attain those goals, and persevering to see their plans through to completion. Creating a plan to exit your business is no different.
Exit Planning Group has helped business owners create and successfully execute their Exit Plans by first establishing three principal Exit Objectives for every owner:
How much cash do you need when you exit to support the lifestyle you desire? (Do you want to be cashed out when you leave the business, or are you willing to receive the purchase price over time?)
When do you want to leave your business? (Or, how much longer are you willing to remain active in the company?)
To whom do you want to sell/transfer your business? (A child? Key employee? Co-owner? An outside party that can pay top dollar?)
Let’s look at an example of a business owner who arrived at his exit date without a plan to reach his goals.
Bart, the owner of a 55-employee company, had long thought about transferring his business to his son and a key employee, but he had done little to prepare for that transfer. As he approached his 58th birthday, he decided it was time to retire and called his exit planning advisor.
This is a summary of Bart’s current situation. “Bart, it’s helpful that you’ve established two of the three Exit Objectives critical to all successful business exits: You’ve determined that you don’t want to work much longer in the business, and you’ve decided that you want to transfer your business to your son and a key employee.
“But what about the third Exit Objective? How much money do you want or need when you leave the business? Have you determined whether you need cash, or can you accept a promissory note?”
At this point, Bart had three choices:
He could retire immediately and try to sell the company for cash, but not to his son and key employee. They had no cash, and no bank would lend even close to the amount of money necessary to close the deal. If Bart wanted to sell today, he would have to sell to an outside third party —one with sufficient cash.
Bart could sell the company to his son and key employee, but he would need to cross his fingers in hopes that 6–10 years down the line, he’d receive the entire purchase price.
Bart could keep the company and engage in a planning and implementation process that would begin by helping Bart (a) determine how much cash he needed to maintain his lifestyle and (b) gauge the gap between his current resources (including the value of the business) and the amount he will need to maintain his lifestyle.
Based on his exit goals, his advisors would create a plan to achieve all of his goals.
Bart’s situation illustrates why setting goals, understanding how each goal affects others, creating a plan long before your planned exit date, and acting to reach those goals are so critical to your successful exit. If you prefer to leave your business on your terms (I define “on your terms” as leaving your business when you want, for the money you need, and to whomever you choose), you must take time to formulate specific, consistent, attainable goals and objectives.
You must determine a course of action—an Exit Plan—based on those goals, and you must, as Michael Hanson wrote, “hold to that action ‘til the goal is reached. The key is action.” Without setting goals at the outset of your exit journey, you may drift aimlessly until, like Bart, it’s too late to make a good decision.
©2008-2017 Business Enterprise Institute, Inc.