All business owners invest in their growing businesses and hope that their hard work will ensure a comfortable retirement. But changing times, technological advances, and an increasingly global economy may wreak havoc on those plans.
In the next Business Killers vignette, a sleepless older man is sitting up in bed. His wife asks him what’s wrong and he confesses that he might not be able to sell his business to fund their retirement. Apparently a large international firm has entered the market and is buying up raw materials and undercutting prices. As a result, the prospective buyers that had expressed interest in his company have pulled back. And while he could sell out to the big international competitor, they would only give him about half of what he thought his company was worth. Any retailer who’s dealt with a big box store or a Wal-Mart entering the neighborhood knows that this scenario isn’t good for a small business owner. Now he’s kicking himself for not listening to his financial advisor, who has been encouraging him to diversify his assets instead of plowing all his money back into the business.
Future-proof Your Business
Two takeaways are worth noting. The first is what my friend Steve Bergman, a consultant with Teleconvergence, calls the need for “future-proofing” your business. Steve has developed a few maxims to help business owners understand trends that may affect their industry. According to Steve:
• if it’s wired, it will become wireless;
• if it’s fixed it will become mobile;
• if it’s wireless or mobile, it will become intelligent;
• if it’s intelligent, it will become shared;
• if it starts as a product, it won’t stay that way indefinitely; in turn it will be
• bundled, then
• interfaced, then
• integrated; then
• combined to become multi-functional
• then become firmware
• then become software
• then lose all identity and become an application or a service.
A Failure to Plan is a Plan for Failure
In the Business Killers example, it may not have been obvious that this particular international firm would get into the business, but it probably didn’t take a lot of insight to figure out that competition is always a potential threat. The second is that regardless of how successful a business you are running, you need to begin planning your exit strategy years in advance of the actual retirement.
Had our business owner heeded his financial planner’s advice, he would have set aside money to help fund his retirement from the outset, thus leaving him less dependent on a sale of the business. In addition, he would have been working with a business broker or perhaps a business coach or consultant to develop an exit strategy that might have avoided the “fire sale” that he is likely facing.
Again, a failure to plan has turned into a plan for failure. Don’t let it happen to you – whether you are just starting a new business or nearing retirement, it pays to talk with professionals who can help you realize the wealth that you are creating.