What’s Your Plan?

In my contractor coaching business, I speak with contractors all over the country, and everyone seems to be doing well. Despite the pandemic, contractors are generating record sales and revenue. It is a great time to be in construction! I have learned over time that many of the contractors I work with are over 50 years old. As I am over 60, I share that point due to the benefit of hindsight that comes with age.

As we review best practices around running a more profitable remodeling business, I have started to ask my clients about a future potential transition plan when they plan for their eventual departure from their company. The responses I get back reflect the fact that most contractors do not want to talk about this and have invested little time planning for their departure:

The Five Reasons Why Business Owners Don't Exit Plan

1. Owners fear the unknown. Fear of the unknown, or fear of change, is a key source of Exit Planning aversion. You may hear a client say, "I don't know what the future will hold, so I will stay here in the present." Additionally, many business owners are better short-term thinkers than long-range visionaries.

2. Contractors do not know what they want. Many business owners are too busy to consider what they want in the future because they spend so much time trying to get what they want out of their businesses in the present. For example, "I've been doing what I've been doing for 30 years. I don't know what I'd do if I didn't have a place to go in the mornings."

3. An owner's identity is tied up in the company. After founding and running a successful business, many business owners feel that their companies are extensions of themselves. Their business is how they relate to their world.

4. Owners think they are the only ones who can run the show. Founding owners can run into the thought that they are the only ones who can keep the business up and running. On the surface, it makes sense: "Without me, the company will fold. I'm the only one who can make things work." These are those owners who refuse to take vacations and micromanage every situation.

5. The owner never wants to retire. For some owners, work is more than a means to wealth - it is their reason for waking up in the morning. They might say, "I want to die at my desk. I have no other interests other than my company."

Does this look familiar to you? I can certainly relate to it. I have been in the industry for over 30 years, and my role in the industry is part of my identity!  

The Statistics

On a related note, the Exit Planning Institute researched the state of owner readiness to exit their business. Here are the results:

• Two-thirds of owners are not familiar with all of their exit options

• 78% have no transition team, 83% have no written plan, and 49% have done no planning at all

• 93% have no formal "life-after" business plan

• 40% have no plans in place to cover illness, death, or forced exit

We Need to Address This!

Most of you started, bought, or assumed a business for income, freedom, or a sense of duty toward the family business's continuity. You have been successful, so why stop there? Why not take that next step to create transferable value worth 4 to 5 times the income you generate?

Baby-Boomers are Afraid of Growing Old

Yep – I am one of them. I am entering the 3rd act of my life. In Act 1, I went to college, found a profession, and got married. In Act 2, we had our son's birth; I got to build my career and raise a family. As I enter Act 3, I am financially stable, my son has started his career, and my wife and I are empty nesters. Here is a simple exercise to determine where you are in your life:

• Write down the age of the person who has lived the longest in your life

• Now write down your age

• Calculate the difference!

If that number is between 20 and 40, you have entered your 3rd act!

Let's Start Planning Your 3rd Act

Exit planning or transition planning is simply a business strategy! You already have experience with this. You do this with your homeowner clients regularly. You take their abstract ideas for their home renovation and work with their budget; you help them create a design and construction plan to create a space that they can enjoy for years to come. You are already assisting them with their home transformations.

Can we do the same with our business? Exiting is a once-in-a-lifetime event, and you don't know what you don't know. There are numerous reasons that you have not started. Part of the reason here is that there is too much emphasis on the end. Instead of thinking about "the end," begin to focus on what you can do right now to make your business and personal planning better. If you start to embrace that, you will see significant results and generate lots of exit options, including sustaining your business involvement even longer (which is probably what you want).

Get yourself in a position to harvest the value you have built. This investment in your business transition and eventual exit is an investment in creating a better lifestyle both now and in the future.

A Paradigm Shift Is Required

Exit or transition planning is simply a good business strategy integrated with your personal and financial goals. It is your value-management system that makes the timing of your exit irrelevant. Good exit planning focuses on what you can do right now to grow the business's value and drive income. Forget the future! Focus on today. By building a business with characteristics that drive value and integrating your personal and financial objectives into it now, you will have many options to exit on your timeline and terms.

Getting Started – Personal Objectives

• If your company was running "right," what would your job look like?

  • Days and hours you would work: _______________________________________

  • A typical day’s activities: ______________________________________________

• How much vacation would you take (with no contact with business) ______________

• What material assets do you desire? (home, vacation home, cars, boats, etc.) List them and your estimate of the cost for each:

  • Asset: ______________________ Cost of Asset: $________________

  • Asset: ______________________ Cost of Asset: $________________

  • Asset: ______________________ Cost of Asset: $________________

• If you wish to travel, where, for what purpose, when, and how long?

• What non-material things attract you:

  • Family

  • Church

  • Community

  • Self-development

  • Other: _________

• When you retire, how will you spend your time?

• What are you doing now to prepare for that?

Business Objectives:

On a scale of 1-5, with 1 being the most important, please rank the importance to you of each objective in transferring your business:

• __ Security for employees or employed family members

• __ Maintaining your business' culture

• __ Maintaining the name or brand of the company

• __ Assuring continued value to your customers or vendors

• __ Entrepreneurial opportunity for employees or employed family members

Your Personal Vision (100 Words) 

• Begin to describe your goals for exiting the business and life afterwards (in 100 words): ____________________________________________________________________________________________________________________________________________________________

This is the Beginning of a Strategic Exit Plan!

It's simple but will take some thought. Where do you want to go and when do you want to arrive? There is no rush, and you can plan for detours along the way. There is a lot to see and take in. You might even change your destination. Just like a building plan, revisions are part of the process, but it starts with a plan!

I took several of the questions above from a Personal Vision Guide that was shared with me. If you would like to receive a copy of the Personal Vision Guide, e-mail me at david@remodelforce.com. I will be happy to forward that to you.