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“It’s not personal. It’s just business.”
I don’t know about you, but as someone who has been an entrepreneur since I was a teenager, I’ve never connected with that phrase.
It felt personal when I was barely earning an income to help my business grow. It feels personal every time I seek advice from friends, family and even my advisors on next steps. And it feels personal witnessing my employees grow, thrive and find meaningful employment in my business.
My business is personal, and so is my purpose. While my work has given me a sense of purpose, I anticipate that the way I seek to fulfill my purpose in life will change. That’s a natural part of evolving as a human.
I don’t know when I’ll sense the need for change — that’s the exciting part of living. I don’t know when the market will be most favorable for me to sell my business. Sure, I can make a plan, but making a plan like that doesn’t account for waking up one day with another business idea in me. Nor does it account for the most common reasons for exiting a business: the 5 Ds. That’s divorce, disagreement, disability, distress and death — major events that can leave you unable to harvest the wealth from your business if you’ve not been planning for an exit all along.
All of that sounds pretty personal to me. Here are three ways to shift your mindset and position yourself personally for a better exit.
Mindset shift #1: Value creation
For traditional employees, starting a 401(k) or another retirement account from their first day on the job is the foundation of their retirement savings. But for an entrepreneur, the money has been invested and reinvested in the company. For most business owners, what’s left is 80-90% of an owner’s net worth trapped within the business.
That’s why business owners need a way to create value, multiplying how much a business is worth to a potential buyer. So, your mindset needs to shift from an income mindset to a value creation mindset. That starts with an independent assessment that tells you what your company is worth, what it could be worth if it were best-in-class and how those numbers compare to your post-exit personal and financial plans.
While you may be currently earning the income you want, you need to consider when all you have to live on is the wealth you created. Are you willing to adjust your post-exit lifestyle goals, personal plans and financial needs? It’s unlikely. Therefore, you need to drive value in your business, starting today, to reach the value you need for your plans.
RELATED: Navigating the Exit: Financial Wisdom from Matt Ford, CEO and Co-Founder of Sidekick Money
Mindset shift #2: Your exit is now
The best day to start exit planning is the day you start a business or take ownership of a business.
The second-best day is today.
The problem is, many owners are so bogged down in the day-to-day that unless an exit is imminent, it’s easy to put off thinking about it.
Exit planning doesn’t have to be counter to your day-to-day — in fact, it’s the opposite. The things you do in your company every day impact the value of your business. Whether you’re improving your company culture, codifying processes, securing customer relationships or developing your talent, you’re both planning for an exit and driving value in the eyes of a potential buyer.
If you ignore my advice to start as soon as possible, consider this. To really plan an exit correctly, it takes 5-10 years. It’s possible in 3-5. If you’re ready to retire, are you willing to spend years on an exit to have enough wealth?
Make value acceleration a part of your life, and you won’t have to.
RELATED: When Should Business Owners Start Developing an Exit Plan? Here’s What You Need to Know.
Mindset shift #3: Find purpose
Entrepreneurship can feel like a hobby and a job all wrapped up in one package.
One of the biggest obstacles to exit planning is the belief that an owner will lose their sense of belonging when the business is no longer theirs. As a result, they cling to the business and may even sabotage their own exit in order to avoid confronting their identity outside of it.
You’ve worked hard. You’ve built skills. You owe it to yourself and your family to have a next act of your life that you’re excited about. To be excited, the next act has to be tangible, with a real action plan. You have to have a personal plan that you’re excited about and have given as much thought as a business plan, or you will get in your own way. Finding purpose in what you’re doing — and then what you plan to do next — will help you complete a successful exit.
Related: Every Business Owner Needs an Exit Plan — It’s Time You Develop Yours.
You don’t have to do this alone
Initially, it is going to be difficult to plan for an exit, even if you don’t believe one’s coming for a while. And planning can be delicate at first. That’s why outside counsel is always a good idea.
Build an advisory team that can help you build a business plan, yes. But make sure your advisory team spends just as much time on your personal and financial plans. After all, they’ll be the reasons why most people are motivated to drive value in their businesses in the first place. And the greater your dreams, the more value you’ll want to build — and the earlier you’ll want to begin with the end in mind.
