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Exit Strategies for the Prudent Business Owner - Jun 16, 2009

Posted by: Stu Lipkin in Articles

Exit Strategies for the Prudent Business Owner

Most owners start their business with an idea, a dream and a little bit of money. They work many years expanding the business, hiring the right employees, refining their product or service and building customers and relationships. Many will dream about the day that they can retire or at least take some time away from the stressful life. Unfortunately, most business owners have focused so much time in running and promoting the business, they haven't given much thought to FINDING THE EXIT!

Benjamin Franklin is credited with the adage, "In this world nothing is certain but death and taxes." Another truism for the business owner is: "You will exit your company one day in the future." There are several ways for an owner to exit their business. The concepts are simple; the execution can be somewhat tricky:

Sell the business to an outside party.
Sell the business to family members or employees.
Bankruptcy or other forced liquidation.
Untimely death.
Controlled liquidation of the business assets.

Most owners would prefer either options 1 or 2. For obvious reasons, steps 3 and 4 won't be discussed and option 5 is usually not what a business owner would plan. Selling the business to an outside party, family or employees requires extensive planning, timing and discipline. Just like selling your personal home, you probably wouldn't make that decision last minute without understanding the market conditions, the value of your home and what improvements could be made to your home to make it more marketable. The same holds true for a business.

Unlike the sale of a home, the sale of a business requires planning and a strategy that could take 3-5 years to execute. It's important that a team of professionals be assembled just like you'd use a real estate broker to sell your home and assist you in the market valuation. In business, the team consists of your business attorney, your outside CPA firm, an Investment Banker and a financial professional from within that can orchestrate and keep the exit strategy on target.

The attorney will be sure all the legal documents of the business are in order so there are no surprises at time of closing. The outside CPA firm will prepare annual reviews or preferably audits so a prospective buyer will have at least 3 years of financial data that can be relied on. The Investment Bankers will act like the Real Estate Agent in that they will continually keep their pulse on both the selling Company and the marketplace so when the time is right, the business owner can easily pull the trigger for maximum profits. The financial professional will keep his/her eye on the ball to be sure all the parties are performing as expected. If one of the pieces were to weaken, the financial professional would be able to identify and correct those areas before they became critical.

As a B2B CFO partner, I have the tools and the skillset to be the internal financial professional. Our firm has developed a specific exit strategy called "Planning the Exit: Maximizing Value and your Company's Future." If you would like more information on how to plan your exit strategy, please contact Stu Lipkin, Partner with B2B CFO^® at 609-577-5725 or slipkin@b2bcfo.com.