Our Business Consulting advisors answer a recent question one of them received, below:
Question: I am nearing retirement. Should I still be working to grow my business (i.e., investing equity, leveraging the business for growth, etc.)? What do I need to be thinking about to make sure I’m leaving my company in good shape?
Answer: It’s wise to consider your business’s health at every stage of ownership. In general, we would say that growing your business at this stage presents a risk. We’ve worked with people who are seeking to transition out of their ownership roles in the near future, yet are taking on new debt through acquisitions. Given the 10-20 year time horizon for new investments in private companies, now is the time to take chips off the table, not double down. Debt can limit options, both for you and your business.
Here are three additional points to consider:
- What is your transition plan?
As you are planning to transition your company, consider if your decisions are building a company that has value to someone other than you. Your business must be attractive to the next owner. We counsel our clients to evaluate a business’s value from an objective perspective when making key decisions. This protects against building a business that is valuable to you, but not to anyone else. For instance, buyers may only want pieces of your business (the shipping component, the storage component, etc.) as opposed to the whole uniquely configured package that was built to your own preferences.
- Whose advice are you seeking?
We recommend getting the perspective of outside experts qualified to use objective measures to evaluate business and financial decisions. If the feedback you are getting is from internal people who don’t have a vested interest in the success of your plans, it is difficult to know if you are examining the full picture. Periodic reality checks, particularly from experts in your preferred transition plan, can be invaluable.
- Who will lead the business after you?
If you have a qualified successor willing to lead, recognize that this person needs an intentional, comprehensive development plan that equips him or her to take over. In addition, surrounding this leader with a strong leadership team will be of value regardless of your transition plan. Consider, too, if you have accepted the idea that you will soon be leaving the business behind. The founder’s dilemma refers to tying one’s identity to the business, and it can be a stumbling block to developing strong leaders and leadership teams.
As you steward your business, wisdom says that you will want to think objectively about what creates value and intentionally about positioning the business to thrive once you retire. Make sure that what you are pouring your heart, time, and money into makes sense using objective measures, or you risk greatly limiting the Kingdom impact your company has.
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