By: Patrick Ungashick
This article is the fourth installment of a seven-part series on what business owners need to do once they reach the Last Five Years before exit.
You, as a business owner, must answer five critical questions once you reach five years before your desired exit. These five questions define your exit goals and help shape the plan for how you will achieve those goals. As stated in previous articles in this series, there’s no way to sugar-coat this—answering these five questions must happen as you enter Your Last Five Years. Without clear answers, you will not know the steps needed for your exit planning, and you potentially run out of time to maximize your exit success.
The five critical questions are:
|1 - What is My Likely Exit Strategy?|
|2 - How Much Do I Need to Net From My Exit?|
|3 - What Do I Want My Legacy to Be?|
|4 - What Do I Want To Do in Life After Exit?|
|5 - How Exitable is My Company?|
NOTE: Click the article links above to review other installments of the 'Your Last Five Years' series
Question 3: "What Do I Want My Legacy to Be?"
Legacy. This single word causes business owners more emotion when they're standing on their “one-yard line” than any other single word. Few owners would define an exit as being “successful” if somehow their exit failed to uphold strongly-held values and beliefs. Legacy is hard to define. It means different things to different people. Yet it is immensely powerful. Many owners surprise themselves by how essential legacy motives become once they get close to exit. Legacy is so powerful that it can veto price. For example, many owners are willing to accept a lower purchase price for their company if it means making sure their employees, customers, and brand are treated better by that particular buyer.
It’s imperative to determine what is important to you about legacy once you reach the five-year tipping point when there is time to plan and implement steps that will achieve your success. Waiting past then narrows your options and usually increases your stress. For example, many owners have some employees they want to thank once they exit, generally with significant bonus checks. Owners who wait to address this until shortly before exit nearly always stress with sensitive questions such as who to thank, how much to spend, and who should get more or less. Those questions are difficult to answer at any time, and even more challenging when you have dozens of other things pressing on you shortly before exit. An alternative approach is to install incentive-compensation golden handcuffs plans, created for these same employees years before your exit. Payouts earned under these plans nicely double as your exit thank-you bonuses, eliminating most to all of this last-minute stress. To hear one former client’s real-world story on this issue, watch our on-demand webinar – "The Good, the Bad, and the Unexpected".
Figuring out your legacy wishes takes time and reflection, and must start when you reach Your Last Five Years.
To help you get started, we have created “The Three Laws of Legacy”, a video and a white paper with identical content, to give you a framework in order to determine your legacy needs.
We encourage you to either watch the thirteen minute video, or download “The Three Laws of Legacy” white paper, both are the same content. If after reviewing our material you have additional questions about your situation, contact us to schedule a confidential, complimentary consultation.
In the next article in this series, we will examine the fourth question you must answer when entering Your Last Five Years: “What do I want in life after exit?”.