I began 2020 with a list of resolutions for the coming year. I planned to limit the amount of time I spent watching Netflix, take my dog on more long walks, eat healthier, and maybe, possibly, but probably not, start working out. But most of all, I planned to travel more. I worked in the hospitality industry at a Four Diamond award winning property; travel was both my career and my passion. When the global pandemic hit, I lost my career and any possibility of travel this year. My list of New Year’s resolutions seemed nonessential and my plan for 2020 changed: find a new career. An unexpected transition as an employee is stressful, but for a business it is detrimental.
According to our State of Owner Readiness Survey, roughly 50% of owner exits are not voluntary due to one of the 5 D’s: Death, Disability, Divorce, Distress, or Disagreement. 2020 is the poster child for the 5 D’s. While not all these factors played into my own “involuntary exit” from my last position, they do apply to employee exits as well.
I found myself asking,
“How will I afford rent? Groceries? Food for my dog?”
“What do I do now? What kind of jobs am I Interested in? Am I even qualified for those jobs?”
Looking back at those questions now, I realize that I would have been a lot less stressed during my involuntary unemployment if I had asked and answered those questions beforehand. The same goes for business owners.
Creating a Master Plan that incorporates your personal financial, business, and individual needs is crucial to having a successful exit, even if you are not planning on exiting soon.
Personal Financial Needs:
After my boss called to tell me that I had been laid off due to COVID-19, the first thing I did was make myself a gin and tonic and call my mom. The second thing I did was review my savings account and budget how long it would last. I had to consider my rent, utilities, student loans, car payments, and insurance premiums. I am lucky that as a young professional, I have a small amount of debt and the pandemic-related restaurant and store closures limited my miscellaneous expenses. Business owners are not as lucky. They must budget for much larger expenses and incorporate their personal needs, including retirement and healthcare. Advanced planning for a business exit eliminates some of the financial surprises.
Business Needs:
As the social media marketing manager for a Four Diamond Hotel, I thought I had job security. The hospitality industry surely did not seem like a risky industry. People love to travel, and social media provides those who could not travel a way to experience new places. Since my industry did not seem risky, I had no plan for what to do if the worst happened. I, like so many business owners, did not anticipate risks associated with a global pandemic and was forced into an early and unprepared exit.
Managing business risk and implementing strategic and prioritized de-risking measures will help to increase business value no matter when an owner plans on exiting. It is best to be ready to exit a business at any time, thus limiting surprises during an unexpected exit.
Individual Needs:
When I was laid off, I stressed about money and having a gap in my employment, but I will admit, I was excited to have free time. I was going to take my dog on those long walks, and I was going to work out. Maybe I would finally get to some of my New Year’s resolutions. Well, like any New Year’s resolution, I stuck with it for two days. It wasn’t until a week later, when I found myself laying on my couch watching the third season of a children’s animated tv show, that I realized, “Wow, I am bored out of my mind without a job”.
Most business owners fail to think about their personal needs when planning for an exit. Some plan on moving to the beach or going on a trip, but most do not think about what they will do long term. Having a personal plan prepared as part of an Exit Plan helps business owners feel fulfilled in their third act.
My unexpected exit from my last position was stressful, personally and financially, but it led to an exciting new role in my hometown in a growth industry. With proper exit planning, a business owner will be prepared for their own unexpected exit and will thrive in their third act!
Are you interested in learning more about Master Planning? Register for the CEPA Masterclass and become a Certified Exit Planning Advisor.
