You Can Realize Your Dream From Ownership Succession

In today’s economic environment, it may not be feasible to sell your business. In this issue I offer a way to think about ownership succession as a viable option.

Exit and Succession Are Both Challenging In the New Business Environment

The new business economy offers stiff challenges to realization of a business owner’s “sell it and retire” dream. That may leave succession by family members or employees as a more viable option. The retiring owner hopes to limit his/her stay to a year or two as trainer, mentor, and technical or business expert.

But successors are typically unable to borrow the capital needed to purchase the business outright. The retiring owner thus also becomes their lender and remains tied to the business, with significant personal capital at risk.

If you are an owner who hopes to retire in the next 3-5 years, your exit strategy may now be cloudy at best, and at worst seem hopeless.

However, it is possible to accelerate your accumulation of capital over these next few years, while investing to a) increase the value of your business, and b) ensure your successors’ future viability.

Consider “Investing” In Ownership Succession

Reaching your dream may require only two things of you:

• Achieving 15-30%/year returns on your capital investments (ROI) for those 3-5 years, and saving those returns;
• Investing in your business to raise your ROI for the business to the 15-30% range.

That may be a far higher return that you are achieving on any of your investments now, including your investment in your business. So how would this work, exactly?

Well-run businesses spin off 15-30% ROI. A business with, say, $1 million in tangible assets provides $150,000-300,000 per year in pre-tax profit after paying the owner a reasonable salary.

How do they accomplish that? Through proven, consistently executed approaches to improve business performance, operational performance, and organizational capabilities.

Here are two examples of companies with whom we have worked:

• A custom manufacturer went from 5%/year ROI to 35% in 18 months by learning to systematize operations and managing processes.
• An equipment leasing and sales company now earns more than 20% ROI on its $5 million in assets.

Want to know how well your business stacks up as a candidate to carry out owner succession and achieve your dream? We will provide you with the means to assess this. Call or email us for a free initial consultation.

Craig DeForest

The Podolny Group

craig@podolny.com

505/820-0565