For many business owners, the business is more than a means to make money—it's a part of their identity and a link to the past. This can make the idea of leaving it, and committing to the planning required to leave it successfully, very challenging. Consider the story of Tony Charles, a fictional but representative owner who faced and addressed this problem.
Tony Charles was approaching 80. He recently lost his wife of 55 years. Though he was still in touch with his children, they lived all over the world. The only things that linked him to his past were his dog Rudy V and his successful business, "Rudy's Foodies."
He knew that it was time for him to start winding down his 60-hour weeks, for his sake and his company's success. But he wasn't sure he could leave altogether. The work, his business partners, and his employees brought him joy.
During a quarterly meeting, Tony's trusted business advisors shared that several larger competitors had expressed interest in purchasing his company outright. He understood that selling might make good business sense, but the prospect of losing his last link to the past snapped him to the reality of his situation.
"I know I need to start winding my role down, but I'm not ready to just POOF disappear," he told his advisors. "I don't want to be the one holding up more success, but this business is my last daily source of fulfillment . . . other than Rudy V."
"What should I do?" he asked.
Over the following months, Tony's Advisor Team began developing and implementing strategies to allow Tony to say goodbye without leaving entirely. They approached his plans in a three-step process.
First, they determined the amount of money he needed to achieve financial independence. They did so by determining how much money Tony had outside his business. They compared that to what he spent on essentials and niceties on average month over month. And though it was a little bit scary for him, Tony and his advisors broached the topic of how much longer he was likely to live.
These data points gave his Advisor Team a strong guidepost for the amount he needed to sell his business for in order to achieve financial independence.
The competitors' offers would have allowed him to reach this goal, and a professional valuation backed it up.
However, Tony didn't want to sell to an outsider. He suspected that they wouldn't keep all of his employees and that they wouldn't let him ease himself out of the business. So, his Advisor Team moved to the next step.
Tony wanted to ease his way out of his business. He also determined that he'd prefer to keep the business in the hands of people he knew and trusted. This meant an insider sale. The problem Tony faced was that he was still indispensable—making the biggest, most important decisions—which would make it difficult for the company to function without him.
Tony played a dual role as the face of the company and the operational wiz. At heart, Tony was a work-with-his-hands man, and he had built an exceptional operations team. He knew that one of his operations managers, Betty, had the skill and desire for ownership, based on conversations they'd had over the years.
But Betty had no desire to be the face of the company. And though Tony's sales team was strong, he didn't have anyone willing or able to take the business to the next level.
So, Tony and his Advisor Team approached Betty about an opportunity for co-ownership. Over several years, Tony would transfer portions of his ownership to her if she met ambitious, written performance goals. Betty proposed the idea of hiring an outside sales director she knew and trusted who could run the sales side of the business in exchange for a stake in ownership as well.
This would allow Tony to ease himself out of the business and remain capable of acting as a safety net if needed.
With his next-level managers installed and purchasing shares of ownership, Tony had found balance.
He still worked and offered advice to his managers when asked, but he shaved his responsibilities down noticeably.
His face still appeared on the products, and he occasionally met with longtime business partners, but his sales director did the heavy lifting of closing deals.
And with Betty exceeding her goals, Tony was on the road to achieving financial independence without disappearing from the company completely.
Once Tony transferred his ownership completely to Betty and the sales director, they asked him to act as the president emeritus, which allowed him to stay involved on his terms.
Saying goodbye to your business doesn't mean you have to leave it entirely all at once. Whether you want to sell and leave or commit to a slower transition, planning is crucial to positioning yourself and your company for success.
We strive to help business owners identify and prioritize their objectives with respect to their businesses, their employees, and their families. If you have questions on this topic, we can help with more information or a referral to another experienced professional.
We help business owners plan for the single most important financial event of their lives – the transition out of their business.
Get in touch today and find out how we can help you meet your objectives.
