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The right exit strategy for you and your business
By Dave Urness
As the owner of a successful forest industry business, you know just how hard you’ve worked to make your business succeed. You know that it’s not enough to know where your business is at today. You need to have a plan for the future—to achieve the goals of your business as well as your personal goals.
Like a lot of industries, the forest industry today has an older labour force. You may already be thinking about selling or passing on your business; or perhaps that is something that still seems far down the line. But having the right succession plan isn’t just about when or how to sell something. It is an investment in your business. You will always have the business ready for sale so you can step back if and when it’s appropriate. With recent economic difficulties and labour shortages, many business owners felt the pressure to sell whether their business was in prime condition or not. An exit strategy means that when you do sell your business, it will be on your terms.
A proper exit strategy also has immediate benefits. It will make your business more profitable, more efficient and easier to run today, tomorrow and every day until you choose to move on.
What is an exit strategy?
An exit strategy is a comprehensive road map to successfully exit a privately owned business. It will allow you to maximize the value of your business, minimize taxes and help you reach both your financial and personal goals.
It’s important to take a balanced strategic approach in every aspect of running your business. This will allow your company to align its business activities to the overall vision you have for your company. When working with a succession expert, they will walk you through a program that includes taking stock of where your company is at today, where the business needs to be and what needs to be done to fill the gaps.
Change your perspective
One of the best ways to examine your business is to think like a buyer. What would you be looking for? A good answer might be summed up like this: A strong company with a solid customer base, a good team in place that operates effectively and efficiently, and is well financed.
A strong management team is a key driver of value. In the forest industry, like in many industries, people are your most important asset. Too often, the business owner has all the business contacts and is the one overseeing all areas of the business all the time. As a result, when that person leaves, all the company’s goodwill leaves with them. The more valuable you are to your business, the less value your business has.
Too many forest industry businesses rely on the knowledge and experience of owners, to run effectively. Established and well-documented processes and procedures are another fundamental driver of value. As well as improving day-to-day operations, this will show a potential buyer that efficient practices are already in place.
It is not always good enough that a business has customers. They need to be good customers, the kind that will stay with a business even after its ownership changes hands. A diversified client or customer base increases the value of your business in any kind of succession scenario. It is one of the major markers of the health and future prospects of your business.
There is really no downside to ensuring that your financial practices are current and well-documented. It will help you make better decisions for your business now and be a measure of value for a future potential buyer. You should have accurate financial records that can be readily accessed, up-to-date tax filings, budgets and variance analysis, and a good working relationship with your bank.
Many businesses in the forest industry have been in the same hands and run by the same people for decades. Now is the time to start thinking not just about tomorrow, but about five, 10, 15 or even 20 years down the road. You have spent your life building business value. Don’t wait until it’s too late to protect it.
To find out more about ExitSMART, MNP’s succession planning program, contact Dave Urness, CA, Alberta Forestry Practice Leader at 1.888.831.2870 or firstname.lastname@example.org.
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