By Ted Thomas, Sun Exit Advisors
Most clothiers are too busy to think about their exit plan.
There comes a time, however, when business owners want to successfully leave their business.
Unfortunately, when it comes time for transition, most don't know how to accomplish that goal.
A common mistake is to rush to sell in a hurry, without a plan. In the worst case, retailers who wait too long to think about exiting their businesses may find that they are unable to find a successor. In fact, today, and every day this year, more than 340 businesses will shut their doors in this country, closing down operations. Sadly, many of these business owners are giving up because they were not able to find a successor to buy their business.
Ask yourself this question now: What steps have I taken to leave my business in style?
If you haven't taken steps to ensure that you can one day transfer ownership and value as profitably as possible, you need to get started with an exit planning consultant. In case you're still skeptical, here are some reasons you should consider getting your business in shape for an exit.
Many business sales are triggered by unexpected events
One thing the recent economic downturn should have taught all business owners is that no one is currently on stable ground. No matter how good things seem to be going, factors outside of your control could negatively impact your business.
Recently, a business owner I was working with came to me to start discussing his exit plan. He had hoped to transition his business to one of his three sons that worked in the business after his retirement. Before we had started the process of working with him to create an exit plan, he suffered a massive heart attack and had to undergo major surgery to save his life.
Luckily, he did survive the health risk, but it renewed his desire to plan his exit. Had he passed away, his store and customer base may have suffered dramatically because of complications in transition of ownership to his sons. It was definitely something he didn't want to risk after years of dedication to his business.
It's a wake-up call to all apparel retailers. An unexpected impetus to sell -- things like illness, divorce, or disagreements between business partners -- cannot be predicted. But, the occurrence of such a negative event is a very real possibility.
If such an event were to happen next week, would your business be able to smoothly transition to a new owner? Would the beneficiaries of the business exit, either you as the owner or your heirs, be able to appropriately benefit from the sale?
Exiting a business isn't your core competence
You may be a genius at selling clothes. You know how to get new customers and keep them happy. You've managed to achieve an acceptable level of profit that allows you to take care of your personal needs. Your success to date may have given you a big confidence boost, to the point where you think there is no challenge you cannot handle.
But have you ever sold a business?
Selling a company is something that most of us will do only once or twice in a lifetime, at most.
The learning curve to do it right is very steep. Indeed, a properly executed exit plan will take into account your personal, financial and estate planning goals, as well as the goals of the business, with an eye to maximizing profit and minimizing tax liability at the time of sale.
It's anything but simple, and it takes time and expertise to develop and execute a solid exit plan. Contrary to what some might think, exit planning is not something that happens overnight. It's something that can take years to successfully implement and start working toward. So rather than adding the stress when the end is in sight, a retailer would be smart to start thinking about these things now.
Your legacy is at stake
Building your fashion and financial independence may have been your life's work. You may have concerns about whether the business will continue to survive after you are out of the picture. You may have concerns about whether your exit will provide you with enough money to retire in style, taking care of your personal and family needs.
These are important concerns. Ultimately, they will define your accomplishments and your legacy. A business exit is the final act of the performance, and it's the most important one because it may be what you are most remembered by.
In the worst case, without proper exit planning, you may leave a massive burden on family members to sort out the business and determine what to do next. That's not a legacy to be proud of, is it?
An exit plan is not just a way to gracefully bow out, it's a way to ensure that the business you have worked so hard on continues on after you the way you want it to and that you reap the rewards of your efforts in growing the business.
Take exit planning seriously and start as early as possible
Convinced that exit planning is important? Again, ask yourself these questions:
- When I decide to no longer work in my business, what have I done to ensure that I maximize what I take out and minimize the tax consequences?
- Do I understand my business exit goals and do I fully understand the kinds of things I need to be doing now and in the future to accomplish my business exit goals?
The time for action is now. Take some time to consider how you would like to make your exit and develop and execute plans to achieve your goals, so you're not scrambling later.
Remember, the key to successful exit planning is to think forward and reason back. How do you want the exit to play out in an ideal situation? What needs to happen now and in the months and years to come to make that happen? In fact, I often tell my clients that building their fashion empires with the end in mind is the best way to build a business.
The bottom line? When it comes to transitioning from a business, if you fail to plan, you plan to fail. Whether you've just started out, are already running a prosperous retail operation, or are struggling to get by, an exit plan is a must.
Ted Thomas is Managing Partner of Sun Exit Advisors. Sun Exit Advisors, in concert with other financial, legal, and accounting experts, assists its clients to leave their business on their timetable and their terms. Ted Thomas helps business owners craft their vision for the future and employ a strategy to insure that successfully transition their business. For more information, visit http://www.www.sunexitadvisors.com.