I was recently away on a four day dirt bike ride with a group of friends. We had all been riding for donkeys’ years and felt bullet proof. We might all be in the 50-65 age bracket but we were good riders, we were sensible people and all had successful businesses where we were making more than the average wage. Nothing could go wrong or so we thought!
True to form, Murphy’s Law kicked in and one of our group fell off his bike and hurt his wrist. “Toughen up and if you are a girl, then put a band aid on it” was the common cry as we looked at our mate lying on the ground – a bit worse for wear. To his credit, he got back on his bike and rode for the rest of the day. That night, he did some self-diagnosis (as he was a doctor) and discovered he had a broken wrist. [Lesson #1- the tough guy stance is not always the smart thing to do]
No way was he going to the local hospital for a bit of plaster and a few screws. He got hold of another doctor mate of his and was whisked off through the night to the best wrist surgeon in NZ. [Lesson #2- when there is something wrong, go for the best- not just what is close].
It was not until many days later that we realised our mate is not any old doctor - he is actually a specialist surgeon and he needs his wrist to work. He is now in plaster and out of action for close on 6 weeks and if it does not mend correctly, then he may never be the surgeon he was before. Our mate does not have heaps of income protection insurance or lost income cover, but he does have lots of other doctors working for him. If he did not have a massive business, then he would not have been able to work and ACC would not be paying the amount that it costs to sustain his lifestyle [Lesson #3 - Make sure you have sustainable income flow or enough insurance to cover your inability to work.]
Over the remaining days we had away riding, our night time conversations (lubricated with the occasional beer or wine) turned to our businesses and the fact that our lifestyles are funded by these, our income is derived from them and they are in many instances the biggest investment asset we possess. We started thinking about how we would extract ourselves from these investments and walk away with the value we believe they are worth. The more we talked the more we realised we had not prepared ourselves for a life change nor our businesses for a change in ownership and management. We realised there was no ‘online course’ we could suddenly subscribe to that would provide all the magic answers. We also realised we needed to make some changes to our businesses and structure our exit over a number of years in order to maximise the sale value. [Lesson #4 - the 7 ‘p’s are alive and well- prior planning and preparation prevents pretty poor performance].
It was at this point that my status changed. As a financial adviser who specialises in dealing with business owners and succession planning, I suddenly went from being just an average rider and one of the ‘lads’ to now being the guy everyone wanted to shout a beer to and pick the brain of. We got into some pretty searching discussions around things like ”what motivates us to work so hard, what would we do if we retired, would our wives actually want us hanging around the house if we retired, what would our business really be worth if we had to sell it today, how much key person risk do we actually have in our business, and what would we do with the money in the event we sold our business.” [Lesson #5- reality and perception are two different things and 50-65 year old dirt bike riding males don’t have a good handle on reality!]
One thing we all came away from our motor biking trip with was a fundamental realisation that we are no longer bullet proof and we really do need to get our acts together and start doing some serious planning for the inevitable milestones in our lives.
David Greenslade, BA, MBA, Dip Mgt, Dip Bus Studies (PFP), AFNZIM, MInstD, AFA