To most entrepreneurs, there is no business like their business. They eat it, sleep it and breathe it everyday. Many dont ever want to quit. Some are too caught up in the daily grind to give their eventual retirement much thought.
As the countrys population grows older, however, an increasing number of business owners are going to be faced with executing their exit plan, whether its a result of family commitments, health or other business engagements. Some opt to sell their operations to family members. Others are bought out by their employees. Regardless, without a clear strategy that details how the transition is going to be made, all that one has worked for can suffer.
Andy Willcox, president of ProLine Integrated Systems in Chicago, Illinois, notes that the execution of a sound exit strategy is a process like anything else. The focus for us in running our businesses successfully is process, he said. Any company that doesnt have a comprehensive process probably isnt going to be running at its optimum.
In his company, Willcox and his team endeavor to work from the end result backwards. Ideally, you want to have a wonderfully happy client who ends up telling their friends about you, he said. How do you get to that point? This involves almost every component of the business, all the way from how the business is marketed, how it is presented to customers and the comfort factor you can deliver in your planning with architects, builders and interior designers.
When it comes to devising an exit strategy, entrepreneurs are forced to do some soul searching. Its going to depend on what the individuals goals are; its subjective, Willcox said. There are younger people who are getting into this business, and then there are those of us who have been doing this for a long time, and who are getting towards the twilight of wanting to work as hard as we do. There may be other things that we want to explore.
With this in mind, entrepreneurs must be conscious of how much their company is associated with themselves as individuals. When Martha Stewarts stock trading troubles began, her entire organization suffered as a result, mainly because she was the organization. Albeit less dramatic, the same phenomenon applies to those companies where the boss is the business.
Many of these companies were started by one or two people, and then eventually evolved into a larger staff, Willcox observed. But they still find themselves being highly dependent on the owner, who is seen as the superstar or the rainmaker. If these people arent focused on growing when they are growing their company, and doing it in a balanced fashion so that whatever path they are responsible for is covered, somewhere along the line they are going to lose track.
To avoid this pitfall, its necessary for business owners to constantly impress upon customers and employees what the entire companyand not just the bossstands for. The clients have to understand that my company is a brand and there is a certain way that we do things, said Mark Ontiveros, CEO of Audio Images in Tustin, California. I try to give credit to the team, and the company as a whole instead of taking it all for myself. Obviously, I want to be associated with the company, but I dont want customers to think that if Im not involved in a project, its not going to be done right. This is a matter of having a proper corporate culture.
Many business experts declare that the best time to start developing an exit strategy is when youre young and have many working years left ahead of you. Succession planning should start long before the business owner needs to address their final exit strategy, said John Stiernberg, principal consultant at Stiernberg Consulting in Sherman Oaks, California. You must determine what skills are needed by your staff, and how many people are going to be required in each area of the business. If you are doing that along the way, then when it comes time to sell or leave the business, its not as much of a business challenge because you have people who are trained and capable. They may even be interested in buying the business from you.
Ontiveros is doing just that. By his 40th birthday, he will not have formally exited his company, but he doesnt plan on being involved in the firms day-to-day operations, either.
By my 40th birthday, my goal is to not be in the middle of it, Ontiveros said. My goal is not to be in the middle of it. Day-to-day operations will continue without me having to show my face. I will still contribute very much on a conceptual level, but I plan on getting this company to the point where everyone knows my vision and that we have enough people to do all of the jobs that not only I do, but that everyone else does to support the demand for our services. At that point, Ontiveros says, he will explore other entrepreneurial endeavors.
By removing himself from the daily operation of the business, Ontiveros believes that he will be able to contribute more. By pulling far enough away, there are a lot of things that your eyes are open to from perhaps being exposed to other industries and having more time to strategize, rather than just working on the business, he said.
To get to this point, its necessary for business owners to pull back while they are still involved in the organization day in, and day out. You must let go and delegate, Ontiveros said. Standard operating procedures are a big part of that; for everything we do, there needs to be a policy and procedure.
Equally helpful is assessing, on a monetary level, how much the business is worth. I think every business owner should be aware of what the value of their business is, even if they are not contemplating getting out of it, Stiernberg said. They should get help from their accountants to place a value on it. Its a healthy thing at any stage of a business.
In some cases, the development of a sound exit strategy may be applied in times of emergency. As unpleasant as it may be, business owners must set up contingency plans should some unfortunate occurrence prevent them from doing their job. Everyone needs to treat their company as if they were going to be laid up tomorrow, so that the company can still operate, Ontiveros said. Write everything down, and have standard operating procedures.
As the custom installation industry gains a higher profile within the tech sector, its increasingly important for companies to instill processes and game plans for all aspects of their organizations, including succession and exit strategies.
There is going to be some condensing in this industry, Willcox predicted. There are going to be large organizations out there that are going to want to be more focused on service as products become more like commodities, and these organizations are going to want to be able to support the delivery of these commodities with service. What I would stress for anyone who is trying to get to a point where they can move on and do something else is to build an asset basesomething based on good revenues and good cash flow, so at some point in time you can make yourself more valuable.
Carolyn Heinze ([email protected]) works from her office in Vancouver, British Columbia, Canada.