Colleen O’Connell-Campbell’s Five questions business owners should ask themselves TODAY, to ensure they are setting themselves up for a cash rich exit tomorrow.

#1: Are you clear on how your business is set up? How do you own your business? Sole proprietor, Partnership, Incorporation. What is the share structure?

• There are three main ways you can own your business. Sole proprietor, incorporated, or as a partnership.

• It is important to understand which way your business is set up. And if you are still a sole proprietor, have you passed the expiry date on that - is it time to be looking at an incorporation?

• There's professional incorporation, and then incorporation. If you are already incorporated, then we pivot to look at your share structure. Is it time to be adjusting your share structure?

• What types of shares do you have, and what are the voting rights contained therein? Is family involved? And if not, are you considering bringing your family in? Do you have co-founders that are not as involved in the day to day?

• If you’ve set your business structure up years ago, before you start planning your cash-rich exit strategy, you must re-examine and update (where necessary) how your business is run.

#2: Do you know what your business is worth?

• “Worth” is a touchy subject. Emotional even. You can feel a certain emotional attachment to your business which leads you to think it’s worth a certain figure. Maybe it is. Maybe it’s worth more. Or maybe, you’ve had a few lean years, and you don’t think your business is worth much at all, if even sellable!

• The goal here is to take the emotion out of the equation.

• Business valuators come in different shapes and sizes. Reach out to trusted business professionals who can steer you in the direction of reputable options.

• Either way, it's important to know what your business is worth so you’re not overinflating what you feel is the value, nor are you underestimating the real worth of what you’ve built.

• In addition to that, which is what Double the Sell is really about, the goal is to evaluate where your business sits now, in order to take the steps needed to scale up to double or triple that worth before you are ready to sell.

#3: Do you know what will happen if there is an unexpected tragedy?

• Tragedy can mean different things to different business owners. First, the basics: make sure you have life insurance, disability insurance, anything that could cover any lack of cash flow because of a tragedy.

• If you are the sole provider of the actual service, you are running the company, or you have a tragedy within your family that requires a personal leave of absence, do you have a plan for how the company will run without you? Or are you going to need to shut it down?

• What if something happens to one of your partners or co-founders?

• Bottom line, you must be proactive rather than reactive and always have a Plan B in place.

• This also speaks directly to the business owner looking to eventually sell. The business should be able to run, with few hiccups, without the owner/main partner.

#4: Do you have an exit plan? Have you considered your exit plan?

• Have you considered how you'll exit, when you'll exit? What if someone approached you with an offer? This is another reason why you should have a year by year sense of what your company is worth.

• Will your exit plan include yearly “phases” – things you need to fix, upgrade, improve upon before you would be ready to sell?

• Are you dealing with shareholders /partners? Are they on board with your exit strategy? Do they want to exit at all? Either way, your exit strategy is going to evolve based on micro changes, as well as macro changes. Overall trends in the world as it relates to the business, but also in the personal environment of the owners and the regional environment.

• And that’s the point of Double to Sell, "We're going to help you identify all those different factors and circumstances and lay them on the table so you can come up with your deeply personal, highly individualized, cash-rich exit strategy."

#5: Do you have a view of life after you exit (sell, transition) your business?

• Exit also doesn’t mean “retirement.” In fact, we don’t look at any exit strategy as retirement. We don’t even like the word retire. Entrepreneurs have a deep “business owner” identity and boundless drive and energy.

• Some ex-owners channel that energy into mentoring. They sit on advisory boards. They support young start-ups. They talk about “stages of life” – incorporating travel or adventure into their lives.

• There's the personal identity part but there are also kind of the regular things that people need to think about if they're leaving work behind.

• If you’re preparing to release your business, and add purposeful, joyful activities into this next stage – be sure you know what that looks like. Before you sell. Because once you’ve sold it. You’ve sold it.

 

About Colleen O’Connell Campbell, CFP, B. Comm., Wealth Management at RBC Dominion Securities

O’Connell-Campbell Wealth Management specializes in building and strategizing financial plans that optimize how entrepreneurs, self-made millionaires, and wealthy families - spend, save, and share their wealth.