Getting Off The Treadmill Part 1
I’m not a big fan of treadmills generally, but in an effort to stave off the aging process, I do what I need to do.
That said, the “treadmill” I am referring to here, is what many of us create while pursuing our business passion.
The movie version of the entrepreneurial dream has the lead character building an amazing company that just three years later is sold for an astounding sum. The hero sails off into the sunset with pockets full of cash, and a never-ending supply of party friends.
While that kind of lightning has been known to hit some people, it actually is rare. If you are among the 34% the Small Business Administration says survive beyond ten years, you are more likely the “overnight success story” that was 20 to 30 years in the making.
The reality of business is that relatively few companies of any size are able to create lasting continuity.
Answering the Tough Questions
The “treadmill” to many business owners, is the requirement to be working both on and in a business in order to keep it growing and making money. Figuring out the right way, and the right time to exit can be one of the greatest challenges an entrepreneur must face.
The right move often means not just creating sustainable, passive income that will last the rest of the owner’s life, but finding, developing and retaining great team members to help run and grow the company. In order to do this, you must create a clear plan that starts with answers to hard questions like the following:
How much money do I need, and where will it come from?
Who will I transition this business to? What if no one is ready?
What are the tax implications (damage)? Can anything be done?
What could go wrong? (Something will)
How do I really see myself spending my time?
These questions can be a lot tougher than we think. Consequently the tempation exists to accelerate through this part of the conversation in order to move on to technical solutions. Big mistake! Best to take the time, through careful conversation. It may be hard, especially for someone who has been dedicated to their business for many years, but the reward will be clarity.
You will see a picture begin to emerge. You have all of the pieces, and you probably know what you want the finished project to look like. It’s just a matter of getting those pieces in the right place. It’s worth noting that this is a process where all involved (especially the entrepreneur), need to take the time to get to the right place first. Take it step by step.
A Few Potential Options
With clarity and focus now channeled into your decision making, you are able to turn your attention to some of the more intertwined questions.
First, what will transition look like?
Is there a private equity firm willing to buy? In the current marketplace, and depending on the size of your company, probably. Having a strong management team, being in an industry that is sustainable over the long-term, being in a good position to remain one of the top players in a rich market, will all help your cause. Does size matter? In a word, yes, but there are subsets of the private equity arena (Search Funds for example) that could also come into the picture.
Is there another similar firm that may want to buy your company? Yes, you’ve likely been approached already. Would this company ultimately become a component of another, larger firm? Certainly a possibility. How do you feel about this?
Are there family members who would like be involved in the continuation of your business? In some cases yes, but in many the kids already have their own interests. They may admire the business, but aren’t interested in carrying it on.
Many owners have a strong sense of legacy. If that doesn’t mean a family transition, then what does it mean?
Another option could be to transition ownership to employees - an option that many consider, but often dismiss (usually due to a lack of understanding of the nuances available in such a design). Depending on the culture of the company and the meaning that it holds for the owner, this may be a concept that deserves a closer look. Even so, while the idea of letting everyone have a piece of the action sounds great, where will the money come from?
Coming up in part two...
We’ve identified the problem, and cornered what’s important to the business owner and the sustainability of the business. In part two of Getting Off The Treadmill, we’ll discuss how this clarity and focus can be powerfully channeled into decision making, communication, and action.
~ Dan Darchuck, Chief Executive Officer