RETIREMENT PLANNING STRENGTHENING YOUR PLAN
One of our clients engaged us to help him sell his business. He was in his mid-30s and was not enjoying the business he created. By nature he was a technician and got into the work because he knew how to do it and didn’t want to put money in someone else’s pocket. It’s very typical for a small business to evolve from this basic startup point. We started to discover the challenges by focusing on keeping the end in mind. We found that due to his less- than-ideal operating skills there were various weak spots in the business that were not being attended to. Tese caused headaches and eroded profit and consequently asset value. To help him get the best outcome for the sale of the asset, a series of operational improvements were put into action. Tis was primarily to bring the value up so the transaction would be worth something more than a fire sale. Te results over time developed an operation that took the business to new revenue performance and profitability, and he still owns it years later. Te business is now a significant asset in his portfolio and when he does sell it, internally or ex- ternally (both of which have plans structured), it will con- tinue to generate income for him despite his lack of direct involvement in the business. When an irrigation or landscape lighting business leader stops and consciously begins the thought process of the transition of a business from his or her care to another person or entity, there are lots of dynamics attached. Ulti- mately, there is also a tangible physical and emotional expe- rience as well. Much like the separation of a child from the family unit to marriage or geographical distance, we can rationalize it intellectually but the pit in our stomach still exists. Tese dynamics become very real very quickly. Te basic routines of interacting with staff, going into the of- fice, walking around the warehouse and just chatting with colleagues at lunch about what is going on in the business all begin to take on a new shape when you are thinking about its future and your legacy. Yes, your “legacy” about how you will be remembered at the business start taking up real estate in your thoughts. As a result, the business own- er sometimes defers on further planning of the transition.
KEEPING THE END IN MIND DOES NOT MEAN YOU ARE LEAVING TOMORROW. IT MEANS YOU ARE A GOOD BUSINESS LEADER AND MAKING THE APPROPRIATE DECISION TO MAKE SURE YOUR LEGACY AND BUSINESS LIVE ON INTO THE FUTURE.
the owner and the business are created. Tis will also help ensure financial stability to support potential seller financ- ing if needed. As these strategies are incorporated into the natural operation of the business, these leadership focus points and improvements are received positively by all in the organization. Tese planned actions are the stepping- stones of crossing the river to a controlled and bountiful asset transition.
BE HONEST
While keeping the end in mind, you need to be ruthlessly honest with yourself and answer these questions: If you are not here, who is capable of running the day-to-day busi- ness transactions? Do they even know how and what to do? What about sales, profit and process? Are the revenue- attracting parts of your business on solid ground or do they need attention? Are all sales dependent on you? Is the op- erational part of your business advancing in a way to bolster the value of the asset? Are you struggling with what you should do next and how soon? Is there potential leader- ship to be groomed for buying the business? What about consolidating with another organization? How large of a business do you wish to operate? Is your business sustain- able and scalable? What is your best guess at the value of your business if you were to sell it today? Be very honest with yourself. Grade yourself on your preparedness for your future.
EXIT STRATEGY AND LEGACY CREATION DOES NOT START AT ANY PARTICULAR TIME IN AN OWNER’S LIFE OR THE AGE OF THE BUSINESS.
Tis actually weakens the long-term value of the asset. When setting up for perpetuation, exiting, retirement or any other words associated to this transition of the as- set, the owner needs to plan an intentional leadership and asset turnover. Waiting until the owner is ready to retire, step down or, more tragically, be removed by loss of life, is poor planning or avoidance. Te owner is typically the icon of the business. Trough intentional perpetuation strategy execution, true long-term sustainable value and legacy for
irrigationandlighting.org
A solid perpetuation strategy takes time, especially if the owner is going to get paid out of the proceeds or profits of the business while someone else is calling the day-to-day shots. If there is weak confidence in that person’s ability to execute with urgency and be a proactive problem-solver to pull it off, then your plan has a large gap in it. Your exit can be quicker when sold to a third party, but then it is a matter of demonstrating profit stability and market- place value, which goes back to what is the real value of the asset and not the owner’s overimaginative value of the business.
Now is the time to get your perpetuation plan in place
for your irrigation or landscape lighting business. Keeping the end in mind does not mean you are leaving tomorrow. It means you are a good business leader and making the appropriate decision to make sure your legacy and business live on into the future.
Larry Klimek is the promise guide, founder and lead strategist of JKL Associates. He is available at
larry@jklassociates.com.
March 2023 Irrigation & Lighting 21 FUTURE
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