You’ve poured a lot of time and effort into building your business and watching it grow. In fact, you’ve probably built a contingency plan to troubleshoot any emergency that’s thrown your way, but what you may not have thought about is an exit strategy. OK, maybe you don’t feel ready to retire or even plan for it. But that’s a mistake. There’s a great deal of uncertainty that can impact your business without a well-defined succession plan in place.
You might think it’s a given that you’ll hand the business over to a family member. But what if you become unable to run the business before your family is prepared to take over? Or perhaps you’re banking on the money it will bring in when you sell it. But what if it isn’t worth what you’d hoped?
To guarantee stability when it’s time to leave your business, you need to plan accordingly. Use these four tips to avoid common retirement mistakes:
1. Don’t Assume That Your Family Members Want the Business
If it’s important to you that your business lives on after you hang up your hat, make sure your family is fully prepared to take over. It may seem obvious to you that your family will step in, but that isn’t necessarily the case. You need to make sure someone in your family wants the job, is qualified for the responsibility, and can make smart business decisions. Properly groom your successor to ensure the business prospers.
2. Don’t Linger Once You Let Go
Whether you gift your business to a family member or sell it to a trusted employee, you need to be able to let go. This can be difficult because of the emotional attachment you have to the company you built from scratch. If you sell it to a third party, it’s possible that you would have to stay on as an employee for a certain amount of time. However, it can be unpleasant to be there while someone else takes the helm.
3. Don’t Disregard Cultural Differences if You Merge
If you decide to sell your business to an outside buyer or engage in a merger, you need to be conscious of the cultural differences between the two companies. It’s important to make sure a culture shock won’t scare away key company stakeholders. Is your leadership team strong enough to handle the change? You can make sure that your buyout or merger plan considers cultural issues by establishing a shared approach to decision-making during the transition.
4. Don’t Shut Down Without Warning
After years of work, you might be ready to get everything you can out of your business, then just lock the door and walk away. However, this is a dangerous move, especially if you haven’t planned sufficiently for your own needs as well as your employees’ needs. Then, none of you will have anything to fall back on.
Once you’ve avoided these mistakes, you’re ready to start planning. The next step is to ask yourself some questions about your goals: How much money will you need to retire? Do you need it in one lump sum, or can you take it over several years? These questions will help you frame your exit strategy to fit your needs.
Regardless, you need to start planning your exit from your business as soon as possible. This will put you in the strongest position to avoid these mistakes and their negative consequences. The sooner you have a plan in place, the faster you can focus on what you’ll do after you leave your business behind.
This article was written by Drew McLellan and was first published on LinkedIn.