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A Year-end Checklist for Owners

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As we head towards the end of the year, it is a great time to not only reflect on what has transpired in the past year but also what is to come. If you are a business owner, being forward looking is imperative to success. This article provides a short checklist for owners to consider heading into the new year.


The end of the year is a natural time to look forward and think about the goals and objectives of the next twelve months. Regardless of what type of owner you are (lifestyle, growth-oriented, exit-minded, sell-now), there must be some over-riding goals you want to achieve in the next year. Maybe it’s to make running your business easier? Or grow your revenues by 30%? Or finally get that succession plan with management started? Or possibly, have sold your business and have moved onto other pursuits? Each of these goals are valid depending on what your true objectives are with respect to your business.

There is no rule that goals have to be aligned only on an annual basis. In fact, goal setting should encompass both a long-term and a short-term component. Jim Collins popularized the concept of the Big Hairy Audacious Goal (or BHAG for short). The BHAG is a goal that has a ten-year or so time horizon and is meant to be, like the name suggests, BIG and AUDACIOUS. So, let loose! Dream big! It’s hard to reach the moon if you never dream of it. Similarly, breaking goals down into shorter time increments is also critical to take the necessary incremental steps towards achieving those goals. Consider breaking annual goals down into more manageable quarterly and monthly goals.

Commitment to Value Enhancement

One of the key missing ingredients in most exit plans is the concept of value creation. Why is value creation important? The harsh reality is that most businesses listed never sell. Adopting a value creation mindset can provide numerous advantages to any type of owner. First, value creation naturally helps the business run more independently because it places accountability for functions not solely on the owner-manager but rather on an individual that is responsible for either a given function or a line item on the financial statements. For example, an operations manager may be responsible for gross margins in the organization while a sales manager might be responsible for revenues. Instead of having the burden placed solely on the owner-manager, the organization starts to run more like a machine that is not reliant on one key person.

Another key benefit to adopting a value creation mindset is that you as an owner are more ready for unsolicited offers. With the types of private equity expanding over the past several years to include independent sponsors and family offices, always being in value creation mode will ultimately help you be more prepared (and be able to endure due diligence) than a company that is run more like a lifestyle business.

Value creation means improving how the business runs, improving its ability to sustainably generate cash flow, and ultimately increasing the multiple people are willing to pay for those cash flows. Of all the advantages of adopting a value creation mindset, the greatest may be that it can both generate a greater number of options for an owner as well as potentially providing them with a longer runway to exit.

Run Your Business As If You Will Sell It

Owning a business means that a large portion of your wealth is tied up in that business. Unlike selling publicly-traded shares, which can be disposed of merely through pressing a button, transitioning from your Middle Market business is a complicated and time consuming affair. While many owners have invested both real capital and “sweat equity” into their business, they often fail to take the perspective of a prospective acquirer, and this leads a business that is hard to transfer. Fixing this problem is not a three-month or six-month solution. Realistically, you should count on a three-to-five-year time frame to successfully exit your business, and there may be numerous advantages to starting even earlier since for many Gen X or Millennial owners, retirement is not the most likely next step. This is why running a business as though you will sell it at any time is the most prudent approach because “exit strategy is just good business strategy[1]”.

Don’t Procrastinate!

Outside of value creation, a holistic exit plan entails some activities which are less exciting than growth but just as important to a successful exit. For example:

  • Squaring away your corporate books and records. These will be examined during a due diligence.
  • Taking an inventory of and protecting your intellectual property.
  • Drafting or revising a shareholder’s agreement and ensuring it is properly funded through adequate insurance contracts.
  • Getting your estate planning in order.
  • If internal transfers are planned, planning and executing grooming of successors (which is something that can take years).

On the personal side:

  • Understand your retirement needs by talking with a wealth manager/financial planner and then correlating that information to the current valuation of the business. Are there gaps? If so, how are you going to close them?
  • Assessing your post-transition life and what it might entail. This may include a quiet retirement but it also may include some form of activity such as consulting, taking on another business, philanthropy, etc.

In Short

The year-end is a time for both reflection and looking forward. Make the most of the new year in committing to move yourself closer to growing your business and setting yourself up for success when it comes time to harvest the fruits of your labour!

[1] Thank you, Chris Snider!


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