When talking with a business owner friend of mine recently I posed the question “how do you know when it’s time to get out of your business?” His response was, “when the note is paid off.” Most business owners would probably have a similar first thought related to a financial goal. Yet my friend knows that the answer to the question is a complicated one, tied to his values, his legacy, his professional and personal identity and his life goals in addition to his financial obligations.
Asking a simple question proves this point. When asked, “If you could sell your business tomorrow for as much money as you’ll ever need to achieve your goals, would you?” a fair number of entrepreneurs say no. While financial success is always a component of running a business, over time it may become less significant compared with other motivations. The business owners I know tend to fall into one of three categories. They stay with their business because they want to, they need to, or they don’t know what else to do. Even if you’re in the first bucket, there’s value in thinking about your eventual transition.
It’s interesting to me that entrepreneurs typically drive their own destiny with ambitious goals, clear visions for their businesses and strong drive to achieve them. Yet leaving a leadership role in their company, either by selling the business or transitioning out of the C.E.O. role is often reactive – in response to an unexpected buy-out offer or a change in the family or a partner’s interest in ownership or management.
So, when is it time to leave your business? I think it comes down to two milestones.
The first is when you have achieved your goals for the business. Whatever they are: leaving a viable enterprise for a family member or partner to take over; leaving a legacy of a new product or service; providing a financial base for another business, a foundation or family education trust; or simply accumulating the assets you want to enjoy the next stage of your life. And this means knowing you’ve accomplished your initial goals, and aren’t just moving the goal posts each year.
The second is when you have clearly defined your personal goals for the next stage of your life and running your current business doesn’t meet them as well as other alternatives will. Many entrepreneurs are so focused and busy driving their businesses, they don’t make the time to think about this second dimension. Yet, whether planning the succession of your business, or your own transition to your next life stage, planning and preparation are keys to success. Fewer than 30% of family businesses survive into the third generation of ownership as a result of poor succession planning and preparation. And a growing body of research suggests that health and satisfaction with “next stage” career and life choices increase with planning and preparation as well.
It may not be time to leave your business for some time, but it’s likely time to start thinking about that transition now.