Business owners who sell tangible goods are probably very familiar with the concept of a stocktake.
In this regard, it typically involves recording the physical quantity of stock held by the business at regular intervals through the year. Simple.
However, an alternative application of this idea is one that business owners appear far less likely to build into their regular business practices: “The action of reviewing and assessing one’s situation and options”.
This is probably because far too many business owners operate on the assumption that they will always remain at the helm of their business.
It can be very easy to imagine you will always be in charge of your business, in amongst the day-to-day hustle of goals and deadlines. But it really could pay dividends to invest some time to ask yourself – where is my business now, and where do I want it to head?
It’s really only by developing a solid understanding of where you’re currently positioned that you can truly begin to visualise – and then achieve – the greatest possibilities for your business’s future.
Below are six areas dimensions every SME business owner should consider when taking a stocktake on their current situation, if wanting to shore up their best possible future.
Taking a step back and considering your business in a holistic light can highlight a number of aspects that may not previously have been focused on.
As an example, you may wish to consider – who are my management team and employees now, and how might I wish this to change in the future? How much could this be governed by the legal ownership of the business, and is it feasible given the market outlook in my industry? Is my business set up in such a manner that it would survive if I left, and do I have a strategy in place to ensure this will go as planned?
Knowing where you’d like your business to head, it’s worth considering whether your financials are set up in a manner that supports this.
You may want to ask yourself – what is my current financial position, and do I expect this to improve or decline over the coming years? How much money will I need in retirement, and how does this compare to what I expect to make on my exit? Do I really know what my business is worth? Will this money be received in one lump sum or several instalments, and how will this money then be distributed?
The legal set up of your business is a crucial consideration as it may act to impede – or increase – your options in the future.
Questions you may wish to consider include – what contracts do I currently have in place, and what contracts will I need in the future? Have I made any legal arrangements to support how I’d like my exit plan to proceed? Have I sought the advice of legal counsel, and do they believe my plans are legally feasible?
This is an area many business owners overlook when considering their business’s future, however it is a crucial component of planning for the future.
You might want to ask yourself – what do I want to do on a daily basis once I retire, and what plan do I need in place to achieve this? Have I considered how I will cope mentally with such a big change? What might happen to my family if the unforeseen occurs – have I adequately prepared for their wellbeing in my absence? Will they be prepared to assist in my retirement?
Though not the most exciting of topics, taxes can play a large role in determining your future cash flow.
This is why it’s worth considering – what taxes do I currently owe, and what taxes will I owe on my exit? Are there any strategies I might implement that could reduce my tax liability, or reallocate my obligations to be timed more favourably? Do I have a professional on hand to assist with this?
6) Value creation
The primary aim of arguably every business owner is to maximise the value of his or her business now, and into the future.
For this reason it would be extremely valuable to ask – how much is the company worth today, and what strategies are available to boost its value in the future? Which value creation strategies have worked in the past, and is it likely that they continue working in the future? Have I overlooked any potential strategies that might work more effectively? Should I drop any strategies that aren’t working so well?
As Steven Covey, author of The Seven Habits of Highly Effective People, puts it: “Begin with the end in mind”. It’s never too late to start planning for your best possible future.
Want to hear more tips like this? We have a whole book full of them! Business Exit Companion is now available at iUniverse: http://bookstore.iuniverse.com/Products/SKU-000960982/Business-Exit-Companion.aspx
Koos Kruger is CEO of Business Exit Companion (www.exitcompanion.com.au), a consultancy firm that provides financial advice and exit-planning services for business owners of small and medium businesses. Koos is a chartered accountant with over twenty-five years’ experience in management, finance, and operations across health care, construction, financial services, manufacturing, fast-moving consumable goods, and professional services. He has advised the likes of Rio Tinto, Downer EDI, Serco, HSBC, BHP Billiton, Allianz Insurance, Munich Re, Nedlloyd, the South African government, and the NSW government, across both Australia and South Africa.