Can you plan the exit of your landscape business too early?
The best time to plan your exit is ten years out.
The second best time is to start your planning now, with an eye to the future.
Last week, a member of my community asked me how long it would take to plan his exit?
On a Zoom coaching call, John, my client, shared his urgency with me to get his exit plan figured out.
He is over 50, and still young enough where he can enjoy his grandkids and free time if he starts to take it now. So, I gave him a sped up plan. He has some of his next generation of leaders in his business already, and I told him to start the transition right now. To do this he has to get the right people in the right positions and get them set up to run the day-to-day.
After he does that, he can start working on the buy/sell agreements.
What about you? Where and how do you start to think about this?
The Who, What, When, Where, and How Much of Succession Planning
Here are some simple questions to answer for yourself, to figure out what your succession plan could look like:
Who do you want to sell your business to? Are you selling to family or non-family? Will you be selling to:
- A single person who you already know and trust?
- A team of leaders in your business?
- An outside buyer that will pay the highest price?
- If it’s an outsider, will they be a strategic buyer? An investor? Or an investor/operator who will run the business?
Gain some clarity on this now, and it will impact the steps you take when you plan your exit.
Even if you are not sure, decide who it “won’t be” and your vision will start to clarify.
When do you plan to sell? Will it be:
- Farther than 10 years out?
- Or in 5+ years?
- Or much sooner i.e. in 1-2 years?
Knowing the timeframe will dictate what kind of actions you need to take and how quickly.
Do you have a number you “need” to earn for the business? If so, what is your business worth now?
Or are you simply trying to maximize the value? It’s good to know what your goals are for this, and how critical it is that your goals must be attained.
What is your role?
Are you looking to keep working once you bring in other owners? If so, let’s gain some clarity on what you want your role to be. And how long you want to be in that new role.
Or do you want to be totally out of the business? If so, let’s get clear on the maximum support you are willing to give the new owner.
Why are you selling?
It may seem like an obvious question, but perhaps the biggest reason that transactions fail is that the buyer is not sure what he or she will be doing after they sell. The seller feels lost, and he or she sabotages the deal.
Do you have a clear “entrance” plan for this next phase of your life?
Where do you start to plan your exit?
Start by getting the 3 C’s take care of:
- Clean numbers that are not burdened with excessive and confusing owners perks. You can still take perks, but make sure the numbers are easy to read, and your company cash flow is clear (assuming you want to set up to sell. If you don’t, then you may not take this step).
- Clear numbers, i.e. up to 5 years of comparable numbers. So it’s easy to read the numbers and read the trends.
- Compelling numbers where you are showing strong trends in growth, turning assets into sales, turning sales into profits, and turning profits into cash.
Remove yourself from the equation:
- Show that your business is not owner-dependent.
- Set up your sales, operations, and admin to operate without you in the day-to-day.
- You can take it a step further like my good friend and client has done (George Tucker, Owner of LanDesign in St. Louis). He has brought in not only a COO but also a CEO to run and aggressively grow his business, so he can enjoy his role of salesperson and owner.
Address the underlying risks:
- A company’s valuations are reduced based on the underlying risks in your business.
- Deal with the internal risks, external risks, service-mix risks, client risks, the inherent risk of your business model. And the other types of risks that your business faces.
Get the right leadership team in place:
- You want to stabilize your core team and make sure they will work with you through the succession, especially if you are selling to someone else. There are ways to lock them in and ensure a smooth transition.
- If they are the ones buying the business, then, of course, this action goes to the top of the list.
It’s an existential challenge to be prepared to sell your business. It makes you face your destiny, your purpose in life, and your needs for the next phase of your life.
What if someone came along today and gave you a crazy good offer to buy your business? Would you be ready?
Remember, after they make that crazy offer, they perform their due diligence, and then they reduce their offer based on all the items they uncover. That is why my friend Frank Mariani likes to say, “always be prepared to sell”.
It’s good for you, good for your employees, and even good for your family if they had to deal with this without you.
But where do you start while you are still running your business?
Use my list to kick-start your thinking. It’s never too early.