Contingency Planning vs Exit Planning
Sam is a business owner who spent 15 years building a flooring business. He had built a strong reputation for being professional, reliable, and affordable. He had a team of installers that he supervised closely and was pulling in over a $1 million a year in revenue.
After years of installing floors, his back went out and he was incapacitated for an extended amount of time. This meant he was unable to visit job sites, supervise his installers and work with customers. He also had not taken the time to train or develop another manager or salesperson who could do what he did. In a few short months, his business began to dry up. The business he had spent the last 15 years building was now worth nothing. Worst yet, he had done little to plan for the impact to his family.
The Unexpected is Inevitable
Over 75% of business owners do not have a plan.
Close to 50% have done nothing to prepare.
No one wants to talk about it, but one day you will eventually exit your business, one way or another. According to a survey conducted by the Exit Planning Institute (EPI), roughly 50% of all business exits are involuntary. Involuntary exits can be due to a number of things including the 5’D’s: Death, Disability, Divorce, Disagreement or Disaster. For 2020, that number has gone up.
It’s Never Too Late to Start Exit Planning
It took Sam three years to get back up on his feet. He has created another business that is less strenuous on him physically and has vowed not to make the same mistake twice. His new business plan included contingency planning. The first thing he did was find someone to work alongside him to be his backup.
He is building this business with the end in mind. Embracing the most important things that make a business strong and marketable including less dependence on the owner, recurring revenue, client diversification, multiple suppliers, tight control over the financials and cashflow etc.
Everything he has done not only lets him sleep better at night, but it also makes a stronger, sustainable, and sellable business.
Exit planning is contingency planning. It is about being prepared for a transition in ownership that protects the legacy your built. It provides you with the peace of mind that you can exit your business under your own terms at any given point in time. Exit planning is simply good business strategy.
At Execuity our goal is to help owners navigate major transitions in their business. We help you get closer to your goals by building and protecting the value of your business.