Plan for Your Own ‘Independence Day’

“The baby boomers are coming! The baby boomers are coming!” Imagine Paul Revere riding through the metaphorical streets of the M&A industry. Ten years ago, this would have been his warning cry. But unlike the British, who did come, the big boomer sell-off hasn’t really happened.

M&A advisors have been anticipating a wave of baby boomer business transitions for years. Now, the conversation in the industry is less about when it will happen and why it hasn’t. Some people point to generational traits like an enduring work ethic. Others suggest it’s a lasting result of the Great Recession.

As for me, I think too many owners have not prepared themselves for life after business ownership. They identify themselves and the business as one thing. They’re too emotionally attached and can’t imagine who they’ll be when they’re simply John Smith, not John Smith, president and CEO.

As we celebrate our nation’s independence, I encourage all the business owners out there to foster their own sense of independence. Start thinking about what life will be like after you sell. Develop your management team. Give them more responsibility and take longer vacations.

Make plans, so retirement is something you are running toward. Otherwise, if you wait until you’re burned out to sell, you’ll be running from your business. In terms of business value, the difference could be monumental.

Burnout is the number two reason business owners sell. Unfortunately, you don’t get points for what you did in your prime. Buyers look at the last few years of performance. In fact, most purchase price calculations will be based on your trailing twelve months.

Start your independence process now. Get a credible estimate of value on your business. Once that’s done, sit down with your CPA and do a tax analysis. Find out how much you’re likely to net after debt, taxes, and fees.

Next, talk to your financial advisor. Give them your personal financial statement and an accurate value on your business and real estate. Create your ideal financial picture and run the scenarios.

I think gathering this kind of information is one of the most important things a business owner can do. Once you have it, you can make an informed decision about when to exit your business—not an emotional one.

If there’s one thing I know, it’s that we will all, 100 percent, transition out of our business at some point. You can go out on your own terms or let fate decide your future.

Make a deliberate plan for independence to maximize value and leave a legacy in whatever way is important to you. The alternative is very likely to leave your company in a state of decline and chaos.