Security Blanket – An Exit Plan Wrapped around Risk and Uncertainty
“For many small business owners, their exit plan is best described as a crap shoot. Managing day to day risk takes precedence over any consideration of uncertainties. So, a business owners exit plan defaults to rolling the dice and hoping for the best. Unfortunately, when snake eyes pop up, all exit options for the business owner are off the table”.
Typically, business owners are masters at managing risk. Before their first cup of the morning brew business owners have already considered several possible scenarios that could confront them, before their day ends. The risk factors included in these scenarios has been carefully analyzed. Contingent solutions have been formulated. Plan A or plan B is ready to be implemented depending upon any new data that becomes available. Business owners love to be in control and feeling prepared. And for the most part, they tend to focus on the immediate future.
For this discussion, risk is defined as a probability that some event will occur that will have a negative impact on the business. Uncertainty is the possibility that some event may occur in the future. This future event has a low probability of happening and may have some level of negative impact on the business. For example, how would the business survive if the owner became incapacitated and unable to run the business?Risk can be managed on a daily-basis. Preparing for uncertainty presents a more challenging problem. Mitigating uncertainty requires forward thinking and actions that must be taken today in preparation for a future event. Since these future events have a low probability of occurring, it is easy to put them off until tomorrow, next week or until it is too late.
Like risk, business owners should also be aware of uncertainty and be prepared for it. Most business owners do think about uncertainty. Unfortunately, often times, it is in the middle of the night when they can’t sleep. They lay awake wondering, “what will happen to my family if something happens to me”? The simple solution to this concern is to create an Exit Plan now. If something unexpected happens to the business owner, absent a written exit plan, the value of the business could drop by as much as 90%. Unfortunately, most owners just roll the dice and hope for the best. When snake eyes pop up, all exit options for the business owner are off the table. It is now up to the loved ones to sort out their options. This is a worst-case scenario and it can be avoided.
Having an exit plan in place will greatly reduce any negative financial impact and a major source of worry for the business owner. The Exit Plan will bring order to an otherwise chaotic event and likely preserve a significant portion of the value of the business. The plan should be a living document and updated anytime there is a change in the business, that affects the exit plan. And most of all it should answer the question, “What will happen to my loved ones if something happens to me”?
If you are a business owner and you do not have an exit plan in place, stop what you are doing now. Pull out your calendar and schedule one hour to meet with someone that can help you get started on your exit plan. It really is not that difficult. Business owners could consider an exit plan as a free insurance policy. A policy that protects them in case they become incapacitated, for any reason, and unable to operate their business. But if additional motivation is required, just think about losing 90% of the value of your business simply because you did not invest the few hours required to develop an exit plan.
If you would like to discuss your business’s future or your exit plan, in person, email me for a complimentary and confidential appointment. I will be happy to help you prepare to meet with your financial advisers by providing a no cost valuation of the current market value of your business. If you would like to comment or ask any questions click here https://fl-bizmart.com/930-2/ or email me..