This is the second post in a series on making sure your legacy is in place financially.
Part of planning and preparation means being ready for the unexpected. There are four D’s that can drastically reduce the value of a company. It is true for a sole owner, but obviously the likelihood increases with more people involved.
When a sale is forced because of any of these things, there is a significant likelihood it will have a negative effect on your company valuation and cause you to sell well below market value.
Unfortunately one of these events happens about half the time according to the data. We discussed several questions to answer when thinking about creating business value in my first post in this series.
These four D’s are definitely another factor to consider as any one of them can easily cause you to come up short of your target and force you to sell before you are ready.
Far too many small business entrepreneurs do not get nearly what they expect from their exit. The company they viewed as their ticket to the future doesn’t come anywhere close to providing the dollars they need for a happy retirement.
Going through any of these four D’s can make that reality happen sooner than planned, making the shortfall even worse. The four are:
- Disagreement/departure (often with partners)
You don’t necessarily plan these, especially the timing. But you can prepare for the possibility of each. Of course the first is a certainty for all of us; we just don’t know whether or not it will happen while we are still owners of our business.
It’s a big part of legacy planning – to identify unexpected things that could occur and make sure you are prepared for that possibility. It is vitally important and needs your attention.
Just last month I got a call from a spouse who had unexpectedly lost her spouse. She was wanting to sell their company and didn’t really know what to do. It was a two person shop, just her and him, and now with the main sales and driver of the business gone she was ready to hand it off, hoping for a nice payday for her future.
Unfortunately I had to deliver the bad news that there just wasn’t much value in the business, even though her hubby had poured his time and energy into it for a number of years.
Don’t let that be your story. Take time to put together a plan to address the unexpected.
HTG Peer Groups exists to walk with leaders in life and business as they achieve their desired growth and legacy. If you have gaps between your actual business value and what you need to retire, let HTG help. Reach out to Dennis O’Connell to discuss how an HTG Coach or Consultant can help you close those gaps.