How to Start Planning for Your Next Chapter
July 13, 2024 According to the Exit Planning Institute (EPI), 75% of business owners profoundly regret their decision to leave within one year. By any measure, that is a staggering number, and when we talk with those who regret it, the common refrains are, “I wish I knew then what I know now” and “I should’ve been better prepared.”
Beginning with the end in mind is a great place to start, but it is often easier said than done. Some never begin, but it is essential to visualize the future so your succession and exit can be by choice and not by chance, which happens about 50% of the time, or a “forced exit” due to unexpected events.
Where to begin? We find it helpful to start by immersing yourself in education on succession and exit planning, identifying and understanding where you are personally, financially, and business-wise, and including trusted advisors— or building a team to finish strong.
Get Educated
You have been building and working in the business for years, and now it is time to work on it. For many, this can be daunting. We are going through an unprecedented time in the horticultural industry and country as the Baby Boomer generation, 21% of the population but 60% of business ownership, is looking to transition. This “Silver Tsunami” means there will be more businesses on the market than available buyers, considering that Gen X and Millennials have different wants and are less entrepreneurial. Thus, only the best will sell, and 80% of businesses simply won’t sell or transition. Therefore, it is essential to get educated on succession and exit planning, what it means for value in your business, and what is involved.
Thankfully, industry associations, such as AmericanHort, publications such as Greenhouse Grower, and others have made it a point to spread this message and have provided educational sessions, forums, articles, podcasts, surveys, and resources to educate owners. Owner groups and networking, such as MasterMind forums, are also excellent opportunities to network, share, and learn. According to the EPI, 68% of owners have some education on the topic, while 66% seek advice. An effective exit strategy is a tool that will create more income today, empower management teams or the next generation to take the business to the next level, create owner independence, and potentially increase the owner’s wealth dramatically. In other words, exit planning is good business strategy. Owners can begin by integrating what they learn and the actions of a successful transition strategy into how they run their business daily.
Brian Sparks, the Editor at Greenhouse Grower, said it best, “Picture this scenario: you’re at a horticulture conference, and you’re standing outside of two meeting rooms. One has a talk on succession planning, and the other a talk on new technology. Look, I dig the next greenhouse gadget as much as the next person, but if your business won’t be around in the next few years, it won’t matter. Let’s fill that first room. When we do, we can really focus on the exciting future of this industry.”
Identify and Understand
Education and knowing what is involved can help you confront any concerns or fears of succession and exit planning. For this reason, as exit planners, we have many questions on personal, financial, and business readiness, or what we call the “Three Legs of the Stool.” We help the owner identify the value of their company, understand profit, value, and wealth gaps, and then embark on protecting, building, and managing that value.
Regardless, be ready to answer a lot of questions and take assessments, such as ExitMap and Value Builder, during a “discover” period and identify value through a business valuation. It is hard to move forward if you don’t know what you have and where you are in the process. In educational sessions, we typically start with some questions for owners to think about:
- Does my business define me? Can it run without me?
- When will I be ready — business-wise, personally & financially?
- How long? What price? Who to sell it to?
- What is my business worth? (Only 51% of horticultural business owners know).
From there, we ask if they have a professional team (accountant, lawyer, financial planner, banker, insurance, business broker, or coach) and stress the importance of including them in the process. Many have had thoughts about the future, but we (exit planners) are often the first person the owner has talked to.
Build Your Team of Trusted Advisors
You can’t do it alone — running a growing business or planning your succession or exit. It takes a trusted team to build value for a company while aligning your personal and financial goals. It can be complex, and various disciplines are needed. Ensure that at least one of these advisors is certified in succession and exit planning. Certified Exit Planning Advisors (CEPAs) have the training, resources, and network to help the owner create the appropriate strategies to rapidly grow value and exit on their terms.
The CEPA is often the “quarterback” of the team who works with your accountant, financial planner, lawyer, or other trusted advisor who may also be a CEPA. However, an accountant may be primarily focused on the numbers and taxes, a lawyer may be focused on agreements and estate planning, and a financial planner will be concerned with wealth management — be sure you have an advisor who can holistically address your planning needs and address each of the three legs of the stool.
Trusted advisors may also include your key management team. There could be a concern that your people may start running for the exits if they hear of a change in ownership. However, if you think your people aren’t thinking about it, we can assure you they are. Your key management team will be integral in any transition — be it to a family successor or a new owner. Have a plan to reward your people for their loyalty when the transition occurs (for example, Retention Bonuses and Phantom Stock programs). Employees become more engaged when they know there is a plan for the future and something in it for them to make the transition successful, motivating them to participate in the process actively.
Finish Strong
There is no more incredible testament for business owners than building a business that lives on and continues contributing to its community and people.
Finishing strong and at peak value should be the goal from day one, not an afterthought, but much of it depends on how you start. Get educated, identify and understand, and build your team of trusted advisors with the assistance of a CEPA. Develop a mission that will transcend any single owner and proactively build a team capable of continuing well into the future. Ultimately, it means letting go when the time comes, secure in the knowledge that your life’s work and legacy will continue.
Get the Survey Results!
The results of the first-ever State of Succession and Exit Planning in the Horticultural Industry Survey, conducted by PivotPoint Business Solutions and sponsored by Greenhouse Grower, are now available, and the extensive report is an excellent educational resource and a way to understand what your peers are doing and learn from them. Visit the PivotPoint website to get your copy and other resources or email [email protected].
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