Why Defining Goals Is Important and How to Do It
Planning for a successful business future is an exercise in foresight and commitment. Without foresight, owners won’t have any idea what success means to them. Without commitment, even the best-laid plans will fall by the wayside. For everyone involved in the process of planning for a successful future, defining goal is the foundation.
When talking about goals, most business owners share some commonalities. Most owners want to be in control of their destinies. Most want their businesses to reach certain cash flow or revenue benchmarks. But unless owners clearly articulate what their goals are, they can stumble into some unexpected and unwanted scenarios. Consider the story of two partners who fell into this trap.
What happens when goals get misaligned
Bruce and Jeff Skaggs spent 20 years turning a passion project into generational wealth. Their high-end clothing line had grown from a two-person outfit headquartered in Jeff’s basement to a $50 million brand. With Bruce in charge of design and Jeff as the company’s rainmaker, Skaggs Couture afforded Bruce and Jeff a life of comfort for themselves and the people they cared about, including their workers.
Bruce and Jeff took pride in giving each employee a yearly $9,000 stipend to use as each employee saw fit, on top of the above-average salaries they offered each employee. Bruce and Jeff also provided employees with pieces of their newest designs, which used only the highest-end fabrics and leathers. Their generosity helped attract the best employees.
As Bruce and Jeff grew older, they decided that they wanted to sell the company to an outside party. They had no shortage of suitors and chose to negotiate with the one that offered them the most money, well over the $50 million it was worth. As they and their advisors negotiated with the buyer, Bruce and Jeff became more horrified by what the buyer intended to do.
The buyer said that they intended to eliminate the employee stipend entirely. They wanted to move production overseas and introduce a lower-quality, lower-priced line of clothing to attract a wider swath of consumers. They also proposed enacting what they called “hiring efficiencies” that would maximize shareholder value and increase Skaggs Couture’s bottom line.
Bruce and Jeff discovered how important the culture they’d built had become to them. They didn’t want to sell the business for top dollar if it meant harming the employees who had gotten them there. So, they took the business off the market, determined to restart from square one.
Though this scenario is fairly common, it’s also eminently avoidable. The root of the problem was that Bruce and Jeff’s advisors failed to ask the right questions about what they wanted from the sale beside the money. While money is important, it’s rarely the only important thing to business owners. Exit Planning addresses this common error because the first step in Exit Planning is when advisors ask probing questions about what owners want from their eventual business exits. This saves owners time and money by letting them accurately pursue what they truly want from the outset.
How advisors help owners in defining goals
The most important tools advisors have to help owners define their goals are the right questions. When owners begin planning for their business futures and eventual exits from their businesses, there’s a lot for them to consider. How much money do they want and need? When do they want to exit, and can they realistically exit by that date? Defining their goals has big consequences. When those goals are poorly defined, it can lead to poor outcomes.
Advisors help owners define their goals by guiding owners to talk about what matters most to them. By asking probing questions, advisors put owners on the path to establishing foresight. For example, if an owner says they want to maximize company value, an advisor might probe into some of the consequences of pursuing that goal. In the process, that owner might realize that if maximizing value can damage the company culture, there might be other goals that matter just as much as maximizing value. Advisors can then help that owner thread the needle of increasing value and protecting employees.
Once advisors help owners establish foresight in defining their goals, they act to keep owners committed to the process. Planning for a successful business future and eventual business exit takes time. It’s full of obstacles and unexpected forks. It can wear business owners down if they try to take it on alone. Advisors work to take responsibilities off an owner’s plate. They provide recommendations based on the owner’s goals to get what the owner wants and needs. They keep everyone on track toward a common goal: letting an owner leave the business when they want, for the money they need, to whomever they choose, and in ways that let owners abide by what’s most important to them.
- Defining goals is important for a successful business future and business exit, and it requires foresight and commitment.
- It’s common for business owners to gloss over goals that are truly important to them. Advisors must understand owners’ goals—and help owners uncover their goals—before committing to any Exit Path.
- By asking the right questions and presenting a proven process, advisors help owners accurately define their goals and work toward achieving them.