I recently ran across a YouTube video called The Secret Powers of Time. Behind the clever animation is the voice of Philip Zimbardo, a social psychology professor at Stanford who explains that how we view time — our orientation within six human time zones — affects every aspect of our lives. Our perspective on time influences who we are, how we view relationships and how we act in the world.
I’ve been on a mission lately to try and figure out why we as business owners – and why people in general – have such a hard time planning for the future. The YouTube video got me wondering if part of it has to do with how we view time. One of the reasons exit planning can seem daunting is because it requires you to orient yourself and your business across three concurrent time zones: past, present and future.
When you own a business, your “time zone” perspective changes as the business evolves. Unfortunately, by the time the business reaches the maturity stage and needs an exit plan for ownership transfer, business owners have all but lost the ability to properly orient themselves in the future.
Start-up: All New Business Owners are Futurists
Starting a business is all about the future. This is a time full of hopes, dreams and positive thinking. Products and services are launched. Markets are developed. Plans are put in place to attract revenue, profits and customers. This is the time of tremendous optimism, passion and creative thinking. There is no thought given to the past at this stage in the business, namely because the business doesn’t have one.
Growth: Juggling Past, Present and Future
As the business grows a shift begins to occur. More time is spent in the present and past time zones. We look back at the previous year’s performance. In the present we deal with an endless stream of operational issues. We focus on the future with activities like business development and sales forecasting.
In general, however, the concept of exit planning will not occupy the owner’s future time zone during the growth phase. In fact, it is not something that most owners address unless it becomes a present-tense reality, appearing unexpectedly in the form of an unsolicited buyout offer, pressure from a management team, personal illness or some other “trigger” event. This scenario isn’t as much an internal exit plan as it is a reaction to external forces.
Maturity: Stuck in the Past and Present
As a business enters into the maturity phase of its life cycle, there is a natural tendency for the owner to be more oriented in the present and past. The desire — and risk tolerance — for expanding product lines, developing new markets and general business expansion starts to wane. We accept the notion of limited growth or even settle for status quo. We spend our time working in the business rather than on the business, and don’t look ahead much further than achieving short-term operational goals.
Ironically, the need for business owners to remain focused on the future is just as critical at this stage as it was during the start-up phase. The business will have accumulated significant value as the products, services and brand become established, and the bulk of the owner’s personal wealth may be tied up in the equity they have built in the business.
This can be the most dangerous period for a business owner in the context of a successful exit plan because now there is so much at stake.
Exit Time Zone: Back to the Future
The exit planning process is a time to re-calibrate the clock and begin to think of your business across multiple times zones, bringing back that critical future component. Are you mentally and financially ready to exit your business? What will your post-exit life look like? Are you too entrenched in the business today — both operationally and emotionally — to even think about an exit? Will you need liquid wealth from your business to fund your retirement?
Regardless of where you are in the life cycle of your business, the future is always out there. The sooner you can begin to orient yourself across the three main time zones, the more successful you will be in determining the optimal time and manner in which to exit your business.
[Many thanks to Joel Goobich of Big Picture Advisors for his contributions to this post.]