Entrepreneurship is all the buzz today. Everyone is thinking of the building the Uber of whatever and raising funds from VCs and all that stuff. The reality is that most either just think about it and for those who took action, 90% probably failed within a couple of years and most called it quits within the first 2 years.
As for those of us who survived and built a somewhat successful business in whichever industry that you are in. Have you thought about the next question? What’s next? What is going to happen now that my business is doing well, profitable and giving you the life you wanted and has achieved the goals that you set for yourself. What are my options?
1. Continue operating the business
This is the most obvious choice and very often the easiest decision to make. As per all easy decisions, they are usually not the best ones. Unless you have put in place a clear plan for growth, many businesses eventually run into a comfort zone and that is usually the first sign of trouble. As the saying goes, “The comfort zone is great, but nothing ever grows there.”
All businesses have a cycle, regardless of the industry you are in. Thinking that you can run a business without a long term growth plan will almost certainly result in the business reaching a point where without making any drastic changes, the business will fail. Don’t believe me? Take a look at Toys R Us, good example isn’t it?
2. Selling it away
This is one of the most common exit routes for many entrepreneurs. The equation is simple. You spent years building a successful business, an offer comes along to you to buy out your business and you sell it. The math sounds great, but the problem is most businesses are not structured to put themselves in a good position to be acquired.
Many SMEs do not put thought into this, they go about doing their business, and as long as the company is cash flow positive for the owners, they are happy with it. Notice I say “cash flow positive” and the word “profitable”? Most small businesses usually end up as a source of income and the owners usually become employees of the business itself.
Getting acquired does not happen by chance, it is purposeful and is usually done with a plan. Over the years, we have seen clients who were ill-prepared, losing hundreds of thousands and in some cases, millions when deals are pulled due to stupid reasons like not having proper financials in place. The first thing you have to do, is to make sure you are structured to put yourself in the best possible position to secure the best valuation possible. The next thing is to put yourself out into the market, speak to professionals and network with partners. Sounds a lot like a date, doesn’t it?
3. Merging it with another business
Another common route taken by entrepreneurs is merging the business with an associate to create a bigger entity in order to gain more leverage with the objective of scaling the business to another level. Again, this is usually done with a plan and very often the existing directors will still stay on to take on senior management roles and continue with their existing roles.
In order to make this a possible plan, it is important to figure out internally the reasons for wanting to merge. In many cases, businesses merge due to some form of synergies that can be realised from the merger. In order to explore this option, it is important to audit your own strengths and weaknesses and also deep dive into the desired outcomes that you are seeking.
4. Professional management
This probably has more to do with succession planning than anything else. At this point, you probably have employees that are capable of managing the business or you are looking to hire professional managers for the business. By doing so, your objective is to eventually relinquish the management of the day to day operations of the business. This option could take some time as finding the right individual can sometimes be very time consuming, and in some cases, you require some luck as well.
If you find your business in this situation, and you find yourself considering one or more of these options, it might be a good idea to get some competent advice from a third person perspective. Talk to us at U Ventures to help you make the best decision for your business, today.