Randy Long talks to Alexander “The Engineer” Lim, host of AuthorStory by alvinwriter.com about his latest book, The BraveHeart Exit: 7 Steps to Your Family Business Legacy.
Run the business as though you wanna exit at any time. Always be ready for your exit. ~Randy Long
Randy notes that the best time for a business owner to start planning for his exit is five to seven years prior to that actual date, as a hurried exit could result in some missed opportunities. He also notes that business owners usually don’t know what a saleable business is, as third-party buyers look at a business differently from the way business owners do. The most important part of building a self-managing company is building a good business team that enables the business owner to work on the business, rather than in it. A management team results in a business that is worth more money than one without one, and enables a business to grow faster.
Where percentages are concerned, twenty-four percent of all businesses are sold to the business owner’s children, who would have the potential advantage of growing up in an environment where the business is part of their lives; around thirty-nine percent to the business employees and the remainder to third parties. Randy notes that the nature of the business can also be a factor with whomever inherits it, with farmers being more likely to transfer their businesses over to their own children than not. Some businesses are actually more of a job than a business, such as businesses based around a professional like a dentist or a lawyer, and for these kinds of businesses the leverage isn’t as great as compared to those businesses with management teams.
The exit process starts with three questions that need to be answered: who the business owner wants to transition his business to, when does the business owner want to transition the business and how much does the business owner need from that transition in order to be financially successful during one’s retirement. The next step is to look at the owner’s self-worth and the value of the business. A market appraisal is then done on the business, after-tax-from-sale monies are also calculated, and any gap between what the owner wants and what the business is worth is then estimated. From there, necessary steps can be taken to address that gap, such as creating a management team and growing consistent revenue streams, to enable the business owner to get what he needs by the time he transitions out.
Randy Long’s website for his book, The BraveHeart Exit: 7 Steps to Your Family Business Legacy, is randymlong.com.
Purchase on Amazon: The Braveheart Exit: 7 Steps to Your Family Business Legacy by Randy Long