The extent you need to plan for your business transition depends on if you want to completely let go of your business or if you want to maintain an element of control while not being involved in the day to day operations.
Transitioning the operations of the business
You might want to retain ownership of your business without being involved in the day to day operations. You need the flexibility of being anywhere in the world only checking in occasionally to see how the business is doing. If this is the case then start working on the following before you leave the business:
Appoint a successor
Look for the person you will like to take over your business and start developing this person’s skills. I have seen business owners suddenly decide there are burnt out and stop actively showing up in the business. This leaves their employees with no sense of direction. In circumstances like this, the manager’s job transitions to putting out one fire after the other. Take the time to groom your successor for success.
Standardize your processes
Standardize your processes so consistent results can be produced even when you are gone. The areas of your businesses that need standardization are as follows:
Financial
- Forecast and budgets
- Key performance indicators
Operations
- Company History and Vision
- Human Resources
- Innovation
- Information technology
Marketing
- Brand recognition
- Product/ service differentiation
- A growing market base
- A proven sales and marketing process
- Customer retention strategy
Formulate a strategy for personal income after exit
Some ways to take money out are:
- Fund retirement through the business
- Lease your building to your business and get paid rent
- Get paid dividends or distributions depending on corporate structure
You want to make sure you are financial independent after you leave. If the main source of your retirement income comes from your business, then be very careful to plan you have enough income to supply your needs.
Transitioning for the transfer of the entire business
Some entrepreneurs want to completely walk out of the business. This can be achieved by selling the business. Selling the business has the advantage of exiting with a lump sum which can be invested in other assets. If you plan to exit your business by selling it, then start prepping the business for sale about 2-5 years in advance. Follow the following steps
- Value your business
- Perform a gap analysis: this is the difference between what your business values at and what you could potentially sell for
- Hire a team of experts to help you fill the gap before selling
In summary, most entrepreneurs do not think of exit until they are completely burnt out. Waiting this long to think about it means you will not get the best value for your business.