The initial phase of the business life cycle, ‘Entity Selection and Start-Up,’ requires careful thought and planning for such details as whether to purchase an existing business or start a new one, setting up the legal structure, analyzing the size of the market and its growth potential, determining the ease of securing loans or funding, etc. It’s clear that all these considerations are critically important.
In the second phase, ‘Growth and Value Creation,’ the business requires development through such activities as refining the market niche, branding the company, forecasting sales, automating procedures, building staff, expanding operational financing, monitoring and adjusting insurance needs, etc. This phase also includes planning for expansion, establishing partnerships, mergers and acquisitions, making secure investments, repaying debt, being innovative, sustaining and building growth, etc.
The third phase of the business cycle is preparing your business for transition and making your business attractive to the market so you can exit the business with the wealth you’ve built in your company. This could include improving your company’s branding, reinvesting cash flow, controlling risks, improving the budgeting process, or creating an exit plan.
The Importance of What Comes Next
This article will focus on the third phase of the business life cycle. Everyone knows the day is coming when you will leave your business forever, either voluntarily or involuntarily; this is the time when you set your course for transitioning out of your business.
Most owners want to leave voluntarily with enough cash to live a good life in retirement, and to do so, there are four steps you should know. These four steps encompass planning your business’s management succession through a secure and peaceful exit strategy. In many instances, and mistakenly, an exit strategy isn’t truly considered until late in the company’s maturity; however, a good exit strategy, created when the company is born, will improve the company’s chances for success, reduce the time it takes to reach the exit, and often greatly increase the value of the company at the time of transition.
Most successful businesses start with the end in sight because when the goal is clearly understood, the intervening steps between beginning and end can be identified and built into a progressive set of objectives that lead to your financial freedom. The four all-important steps which may lead to your secure and abundant retirement are:
Step 1: Conduct the Business Valuation
Step 2: Conduct your Personal Financial Analysis
Step 3: Measure the Gap
Step 4: Design and Implement Your Plan to Close the Gap
We’ll address each of these steps in future articles, so that you can prepare your business for its sale to the next owner, whether it is to someone currently in your company or a third-party buyer.