Winning at the Game of Life – A Business Owner’s Manifesto
John Warrillow of Vault Builders has coined the phrase END GAME rather than Exit Strategy, which we prefer because it implies two things. First, that you are playing a game and can therefore still impact the outcome. Second, it recognizes that eventually the final whistle will blow, and you as a business owner will need to be prepared.
Timing the sale of your business is a huge part of the End Game. However, in this case, timing is not so much about a specific date, but rather about meeting a set of conditions. When the business is ready, when you as the owner are ready personally, and when exiting will meet your financial needs (or closing the business won’t hurt you) that is when the timing for a graceful exit is right.
Just like in sports, you need to have a game plan. Even if the plan is in your head, as a business owner you should be playing to win. You can do this by having a plan beforehand, as well as being able to adjust your plan during the game to give you more influence on the outcome. So, to come up with a plan for your next quarter, you need to know the following:
- What constitutes a WIN? (this will be different for every business owner)
- Where are you today in relation to where you want to be positioned?
- How will you move the ball during the next period?
Defining the WIN
Defining the win – Know what game you are playing and what will create a win for your team. You need to know what a win looks like in your personal life, your financial life, and for your business.
A win in your personal life includes what you will do with your time when the final whistle blows. What will you do with your time if you don’t have to show up at the office every day? Will you continue to participate in the business and just take some money off the table? Will you travel the world? Will you start a new venture? Will you dedicate yourself to a philanthropic cause? Knowing what’s next for you will prevent you from experiencing the restlessness that frequently follows the sale of a business. Loss of identity/purpose is the #1 reason why business owners say they regret the sale of their business after the fact.
A win in your personal financial life is just as important. You have worked for years, making sacrifices and taking care of others. As a business owner you need to determine your number. Your number is the amount of money that you need to realize your financial goals. Some business owners have amassed investments over the course of their business ownership, so they can close the doors and retire without the sale of their business. Others will need to sell the business in order to enjoy a comfortable retirement. When thinking this through, don’t forget to take in the frictional costs of a sale such as taxes and the assistance of professionals such as business intermediaries, legal advisors, and accountants.
A win for the business is also defined by you. Are you hoping to leave a legacy with your business serving your community into the future? Do you see unlimited potential for the business if only you had more resources, an MBA, and a huge sales team? Do you want to ensure that your employees are taken care of? The win for the business will help you choose the best strategy for your exit.
Where are you today?
Remember that exiting your business is about ending on a win. To do this, you need to evaluate where your business is today. Are you on the 50-yard line or the 25-yard line? How much time is left on the clock? Before you get ready to sell, make sure to take stock of where you are currently.
Have you defined the win?
Assuming you know your number, do you know the actual value of your business? We recommend that business owners who are intending to sell their business to a third-party, start tracking value formally 3-5 years before they intend to sell. Remember, you can only win a game in the final seconds if the game is close…which means that it is way more beneficial to put yourself in a position to win early in the game. If the value of the business isn’t what you are hoping for, you need to have time to make the changes that will increase the value. Make sure you are paying attention and adjusting your plan accordingly.
What’s your Plan?
If you need to build value in your business, what is your strategy to do so? If you do not have a concrete strategy, it is time to seek assistance and start your value building journey.
We recommend preparing your business to be ready to sell at any time. Business readiness is just one leg of the stool. If the business is not ready, then it will be harder if not impossible to exit gracefully. Do yourself, your employees, your family and your community a favor and have a plan that can be implemented at a moment’s notice. It can be a simple as a letter in your living trust that states your action plan in the event of disaster. If you have a partner, it can be a buy/sell agreement backed up by insurance. However, your spouse/children or employees should not be left wondering what to do in case of your death, or disability. Sometimes the game ends without warning.
Action Plan
- Define your WIN if you have not done so already.
- Know your Number.
- Know where you are in relation to your number.
- Have a plan for your next actions.
- Put a contingency plan in writing so that the people you love don’t have to deal with the uncertainty of running your business without you. The plan should designate who will manage the affairs of the business (either operations or shutdown), how to manage compliance issues (contractors licenses etc.), and if the business is to be sold is there a recent valuation or a trusted intermediary designated to handle the sale? Think of the contingency plan as the living trust of your business.
When it comes to selling your business, play until the whistle blows. Only call time when your personal, financial, and business status align. Preparing yourself and your business for the win takes time and discipline. It’s hard work, but the closer you are when the final whistle blows, the more likely you are to experience a win.