What happens to your business when you die?
The two most desirable outcomes are, the company is self-sustaining and someone with industry knowledge can step in and continue the business, or my child(ren) will inherit the company and run it. From my experience, the most likely outcome is the company will disappear. This is because nearly every business owner wants one of the first two outcomes, but they do not run their business that way. How can someone, a child or not, ever step in to run your company if you are not there? The best strategy is to run your business as if it is always able to be sold. What this looks like is to make the company automated, and self-sustaining. This is achieved with:
- Standard Operating Procedures (SOPs)
- Utilizing technology to automate tasks
- Become paperless
Accomplishing these goals always take an investment of upfront time, but the benefits of running your business this way are many. First, after these procedures are in place, the time it takes to run the business can be cut in half, for every employee. Second, the company becomes self-sustaining so that when it is time for the owner to exit, someone with limited industry knowledge can step in and continue running the place. Third, the net income is going to increase, with drastically reduced time to accomplish tasks, a business can streamline their operations so that they are taking on 2-3 times more business. Fourth, and one of the most substantial, is if the time comes to sell your business, you could be getting millions more for your company, yes millions.
How is it worth so much more? The higher net income is going to be a major factor, but more importantly, the value of the company goes up substantially. Imagine yourself a buyer, how much would you pay for a $500,000 net income company where no procedures are written down, paper bank statements are used to reconcile accounts, paper invoices are mailed to customers, only checks and cash payments are taken, all documentation is in file cabinets, and it takes 50 hours/week to run the business. Now, how much would you pay for a $500,000 net income company where procedures are documented, an automatic bank feed and reconciliation is used with cloud-based technology, ACHs are standard, a cloud-based program is used if a check is ever needed, you can access all documents from your phone or laptop, and it takes 10 hours/week to run the company.
Take care of yourself, your company, and your family by running your business with an exit strategy.