Have You Thought About Your Transition?
It’s been a hectic few years with the economy being so unstable. Many businesses have failed, and those that have survived have had to make serious changes in the way they do business, with layoffs, financial hurdles, and a constantly changing business environment with more and more customer demands.
Many business owners are wondering what to do next. Should they continue as is, which could cause them to go backwards, or should their company be performing at a higher level and do they have a plan to get there? Is it time to change the way things have always been done and go into an aggressive growth mode — possibly even buy another business, a competitor or a product line? Or is it time to start thinking about a transition strategy?
The big question is where to begin.
Critical Factors to Consider
A good place to start is to determine whether the operation is running at its optimal potential. Once a company is performing at that optimal level, the business owner and management team have many options that can maximize value, regardless of the transition track they may want to pursue.
To stay the course, maximizing performance makes life much easier for everyone, including owners,management, lenders and customers. With the right set of metrics and key performance indicators (KPIs), they will have a “daily feel” of the company’s performance and profitability. When the economy and customers make changes that affect the business, business owners will have the information needed to react in a timely and aggressive manner. This “agility” is the difference between action and reaction. It drives success!
For those looking to acquire a business or product line and grow their business, there are a few steps that will maximize these efforts. Once operations are performing at optimal levels, the next steps should be obtaining market intelligence to better understand the marketplace and the competition. This should provide the validation that the company is running at its full potential. The last thing that anyone wants to happen is a growth event that causes significant operational issues to existing business.
The other option would be to start thinking about a transition strategy that may include everything from a management transition, to a merger or a complete sale and exit from the business. The next step would be to conduct a professional valuation, which will establish a realistic value range of the company prior to any transition. Once that value range is established, plans can be put in place to review the current operational performance to see if there are additional areas of improvement that can be addressed, thus improving the business valuation.
Finally, if it is time for an ownership or management transition or even a complete exit from the business, there are many things to consider such as timing, the process, confidentiality, employee and customer concerns and meeting the owner’s expectations throughout the entire transition process.
The world is changing quickly. However, with a good plan, current operations running at a high level, up-to-date and accurate data, and a good team of advisers — including legal, accounting and transition services — there are many options for business owners to optimize their market value regardless of the route that they take.
Please click the link below to read our series of 4 articles on Transition Planning that were originally published in Business Management Magazine.