Ever seen that 2004 movie Raising Helen? The one in which Kate Hudson played a free-spirited and self-obsessed modeling agency assistant who suddenly finds herself raising her sister’s three orphaned kids? We all shook our heads as she tried to fit a trio of energetic youngsters into her glamorous lifestyle and failed miserably- or so we thought. Then, in true Hollywood style, Helen grew up overnight and became the perfect mother: something her deceased sister had counted on her doing. (Hopefully the producers didn’t count on the movie being a box office hit, because it really wasn’t.)
Let’s rewind for a moment. When parents (like Helen’s sister) have a new baby, if they’re not changing diapers, feeding, playing or sharing pictures and stories on Facebook, they become preoccupied with planning for the baby’s future. They budget for college and make other decisions that set up the child for success. For many, the birth of a child will be the catalyst for their first estate planning documents, where they will name a legal guardian in case they aren’t around for that Ivy League graduation ceremony.
When you own a business, you’ve got to be like a parent and dedicate every waking hour to making your creation a success. Most of us have got that part down. But when it comes to the long term, we tend to be short sighted. Exit planning just isn’t part of the equation. But someday, all business owners have to leave their businesses. Ideally, that departure will be planned, so they can leave when they want and on the terms they want.
Perhaps the idea of turning over the company to someone else after you retire is something you don’t want to think about. So you avoid the subject and wait until the eleventh hour, never thinking that the outcome might not be what you hope for. Sometimes it isn’t even enough to retire on.
If you want your business to fund your retirement goals, you need to do more than assume, “Someone will want to buy it.” Sure, someone will, but without a carefully thought-out strategy, the payout might not be what you hoped for. It might result in a bigger financial disaster than Raising Helen.
The person or entity that buys your company will essentially be its legal guardian once you’re out of the picture. Just as a parent would not trust their child’s future to anyone they hadn’t thoroughly vetted beforehand, you want to make sure that potential buyers are qualified. Do they have the business acumen and management experience and ability to keep growing the company? And, for the sake of your own future, do they have the financial ability to pay the amount you’re asking?
It’s not just your company’s future at stake when you prepare to hand over the reins. It’s yours too. Start planning now. When the changing of the guard finally takes place, you -and your corporate offspring- will be set up for the best possible outcome. Maybe they’ll even make a movie about it.
