Early mornings, late evenings, weekends, missed birthdays and kids’ baseball games — many small and medium-size (SMB) IT business owners have sacrificed a lot along the way to build their own business. Now, after decades of commitment and dedication to the businesses, it’s time to sail toward retirement.

Sell the business or hand it down to the kids — it’s all good. Oh yeah?

Whether you’re thinking about a sale or merger, you need an exit strategy. If you don’t have one – and many SMB owners don’t – your retirement ship just might sink.

Fret not. Channel Futures caught up with Arlin Sorensen, vice president, peer groups with ConnectWise, who knows about acquisitions and selling businesses, to share with us some of his expertise and lessons learned. If you want to learn even more, attend his education session – So You Wanna Retire by 2025 – part of the business strategy track sponsored by Cyxtera at Channel Partners Evolution, October 9-12, in Philadelphia.

Channel Futures: You’ve been around the IT SMB block more than a few times. What are you seeing when it comes to IT shop owners prepping for retirement?

Arlin Sorensen: A lot of people in the channel realize they’re not going to run their companies forever and folks that have exited the industry have found that they didn’t get as much money as they hoped for.

Arlin Sorensen

Arlin Sorensen

I’ve heard a quote that says, people spend more time planning their vacation annually than they do thinking about what they’re doing to make sure that their business value is increasing as it needs to.

I think that’s true for most business owners — they assume that hard work is going to turn into money somehow, and in fact, people don’t buy hard work — they buy businesses.

CF: So why would someone want to attend your upcoming education session?

AS: I’m going to address what you need to do to be intentional, so you don’t get to the end of the rainbow and find out that there’s no pot of gold. I’m going to give attendees insight into preparing for a transition for the future — for 2025. Anyone [who] wants to get out in the next seven years needs to act now to prepare, and that’s what we’ll be talking about.

You can’t fix what most owners do to a company in a short period of time. The bad habits that most business owners have operated under can’t be turned around in a matter of months, or even years. I always tell people it takes three years to undo what you may have spent the last 20 years doing to yourself.

CF: Are there common mistakes that IT business owners make, and would you share a few?

AS: One of the big ones is using your business account as your personal checkbook and running everything through the business that has no relationship to the business. Another mistake is failing to realize the importance of a strong balance sheet, which defines the health of a company and is critical if you want to grow the company or do any kind of organic or acquisition growth. The other thing is that there’s no plan. They assume that hard work will somehow translate to a big check.

CF: Are you going to share a road map with the session attendees?

AS: I’m going to provide a way for business owners to calculate based on an estimate of what they need to be able to exit compared to what they have, what the gap is, and then help them think through what they’ll have to do and the number of years they have remaining to get the business to the point where it will meet their needs to exit comfortably.

There’s a worksheet to help them think through — what’s their wealth and personal wealth target that they need to accumulate and how does the business fit into that; and what does their business have to be worth for them to get there. Based on the gap that exists – and there’s always a gap – what has to happen in the seven years to get the business to a place it needs to be by 2025 so they’ll have the money in place to retire?

Every business is going to transition. You’re not going to take it with you, and the sooner people begin to run their company with that in mind, the more likely they are to have a successful exit.