How prepared is your business for your eventual exit? It may feel like that’s something you can worry about later; maybe you’re nowhere near ready to retire or you think it’s too early to begin business exit planning. The truth is, it’s never too early to begin thinking about how your business will survive — and thrive — without you.
Increasing the value and salability of your business now is a wise idea, even if retirement is decades away, because the unexpected could always happen. Plus, business exit planning has the added benefit of ensuring that your organization’s overall health is good, that it can stand independently and that it doesn’t need you there to do all the work.
My guest for this week’s episode of the Elite Entrepreneurs podcast is Danny Wheeler. Danny is a Partner at FAZ Business Advisors and an expert who helps business owners transform their organizations into more efficient, more profitable and more valuable assets. Our conversation in this week’s episode is all about the planning, forethought and strategy of making a business more transferable.
Whether your exit strategy involves selling your business or transferring ownership to a family member or business partner, doing your business exit planning today can help you ensure that your organization continues to thrive without you… and it can help you identify problem areas and pain points in your business that you didn’t realize existed.
Common Business Exit Planning Mistakes that Can Cost You
During our conversation, Danny shared several examples of key mistakes business owners often make that can dramatically impact the value and salability of the business, generally because they fail to start their business exit planning until it is too late. For example, an organization that is too reliant on the owner’s presence has little value if the owner leaves. How many hats do you wear in your business right now? If you were to disappear for a month, would your business be able to keep going without you?
Another big mistake Danny says owners often make is not paying close enough attention to their financials, and especially their balance sheets. If you don’t have a very clear, up-to-date view of your business finances, it can be very easy to overvalue your assets. Not only does this impact your profitability, it can also result in you paying higher taxes unnecessarily. Danny recommends you reconcile all of your accounts on your balance sheet monthly. This will help you identify problem areas in your business before they become major issues, so that you can begin correcting them now.
Also, Danny says relying too heavily on a single client can be extremely risky. He recommends that no single client make up more than 20% of your work. Being too reliant on one client runs the risk that you’ll lose that account and it will do irreparable damage to your organization… and that’s the kind of risk that many prospective buyers won’t want to take.
Partnering with an advisor who specializes in business exit planning and organizational health can help you avoid many of these common pitfalls. Your business will operate more smoothly, efficiently and profitably in the shorter term, and it will be set up for success when you decide to exit in the long term.
To learn more about Danny Wheeler and FAZ Business Advisors, please visit their website at https://fazcpas.com/. And for more informative Elite Entrepreneurs podcast episodes like this one, check out our episode library at https://growwithelite.com/podcast/.