Prepare For The Worst (Expect the Best)
I am by nature an optimist. I think most entrepreneurs are, otherwise they would never go out on a limb and start a business. But things can go wrong; and, as you approach the final stretch leading up to retirement or selling your business, things may be more likely to go awry.
- You could die or become disabled before you sell your business or prepare it for a smooth transition.
- You could get hit by a recession and end up in debt.
- Your top salespeople, worried about what the future holds for them with your company, could join a competitor.
- Your key employees could die, become disabled, retire or join the competition.
- Your employees could unionize.
- An employee could be seriously injured or killed in an accident.
- Government could add new taxes to your industry or make it illegal to conduct your business as you have in the past. (Think about telemarketing laws, privacy legislation, or environmental restrictions, to name a few.)
- A few major clients could go out of business and default on their bills.
- You could disclose sensitive information to a prospective buyer who turns out to be a competitor.
- You could spend so much time courting a prospective buyer that you take your eye off your business long enough to have it go into a tailspin.
- You could name one child as your successor and alienate another who thought he/she should be the one.
- You could choose the wrong successor.
- You could sell the business and end up getting it back because the buyer defaults on his payments.
- You could sell the business, end up handcuffed to it for several years by a contract, and have to watch the new owners dismantle and destroy what you’ve built.
- You could sell the business and become seriously depressed.
- You could end up paying so much tax that there’s not enough left for you to live on.
- You could sell the business and end up divorced, losing the lion’s share to an ex-spouse and lawyers.
- Your bank could call your loans and line of credit.
- You could sell the business for much less than it’s worth.
- You could hold on to the business too long and miss an opportunity to sell at the right time.
I’m sure you can go down the list and check off many that have happened to acquaintances. Some of these could happen anytime, whether or not you’re thinking of transitioning or selling your business. These are the risks that entrepreneurs take when they own a business. That’s why you should get paid well for the years of blood, sweat, tears and risk.
Some risks can be insured to reduce the financial impact. But others can only be mitigated by careful planning and by implementing strategies that address them. The problem is, as you get closer to retirement, you may have a tendency to take your eye off the ball, and lose the focus, drive and energy that have kept the risks manageable.
While you can’t anticipate and plan for every possible thing that could go wrong, there are some that you know are more likely to happen than others. As the owner of the company, it’s your responsibility to manage the bigger risks without becoming paranoid. Because as long as you own the company, when things go wrong, you’re responsible.
June 1, 2011
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