Because times like these do create opportunity.
Do you know what your real number is?
The word “exit” for most owner managed businesses is very evocative. It makes you think of beaches and cocktails and stress-free life; no hassle, loads of cash and endless amounts of time to do what you want to do, rather than getting mired down in the things that take up a lot of your time right now.
While for some owners “exit” is a long way off, the fact of the matter is that all owners will eventually get there, whether by selling the business for a very large sum or being pushed out in a wooden box, we will all inevitably "exit".
I've lost count the number of owners who've sat across the table from me and said, “I'd love to sell my business; and if I could maybe take home a million or 2 million quid after all the fees and taxes, that'd be perfect.”
I'm not quite sure where everybody gets this "£1-2million" figure from, but I imagine it’s to do with some rudimentary maths and it goes something like this:
"If I get £2 million, that pays off the mortgage(s) and I'll make about £100k per year from passive investments which will keep me going nicely."
That's great thinking, right now. But what about the future?
Have you thought about changes to Entrepreneurs Tax Relief and the implications that might have? Have you thought about what your capital gains tax might be, or what regular rate of return you could expect from passive investments and what the tax implications of drawing down that cash might be?
And whilst we're on the subject, what do you want to spend all that cash on now you've got all this time? Your mortgage might be your biggest expense right now, but when you don't have to go to work five days a week you might want to spend a lot of money on a lot of other things. You might take up a new hobby, or sport, or maybe travel more now you're free, things like that. They all chip away at those investments.
More importantly, like most business owners, if you've spent years and years grafting to build something that you're truly proud of and passionate about, chances are that after about six months of sitting on a beach, drinking cocktails, playing golf, going shooting, driving fast cars - or whatever it is that blows your hair back – you’re going to be stone bored...
I've worked with four businesses in the past who were owned by people who were lucky enough to sell their business early on (and when I say "early on", I mean in their early forties) and the longest any of those guys spent on the sidelines before buying or getting involved in another business was 18 months. In my experience, a long, leisurely retirement just doesn’t suit the driven entrepreneurial personality. So rather than costing your retirement plans you could be looking at how much cash do you need to get into something new.
People dream of exiting their businesses, but in reality most don't know how. They don't know what number they need for the life they want to lead and they don't know what the next stepping stone for that is going to be.
That’s okay for some people. They like their dream and they like the idea of playing at business and drifting on in life rather than having a proper plan. If you're one of those tyre-kickers who loves the sound of "exit", but you're not really thinking about what it means for you and your future; then… jog on. Go back to work and maybe give an action coach a call, or something like that.
But if you're somebody that's really clear on what exit means for you - maybe you've not fully fleshed out your plans, but you know you don't want to be a passenger in your own life - if you want to plan an exit that achieves a certain level financial wealth that then enables you to go on and do the next thing, then The Uncommon Practice is definitely a place for you and we're the people you need to talk to.
Five things to think about when planning to exit your business.