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Plan a Sound Business Exit Strategy: Get the Most Value from What You've Built - Dec 6, 2009

Posted by: Stu Lipkin in Articles

You’ve invested years of time, energy, effort and imagination to build your company and make it successful. You and your family have the rewards and recognition your work deserves. And now you may be thinking about how you can enjoy more family and leisure time and move on to a rewarding and well-earned new stage of your life without sacrificing your lifestyle.

You have lots of company. According to research conducted by Cornell University, there are more than 12 million privately-owned businesses in the United States and 70% of them will probably change hands in the next 10 to 15 years. With that many owners planning to sell businesses, and with that much complexity in the market, thorough exit planning is a powerful strategy for leaving your business successfully and protecting your wealth.

No business can be successful without sound planning. Active business owners are always planning—about how to make their business grow and prosper, not about how to sell it. And that’s the problem. Many owners fail by far to get the best value they could have because they viewed exiting their business as a transaction, not as a rigorous, structured process. They had no sound exit plan.

What’s your mental model?

Consciously or unconsciously, successful owners employ a mental business model based on objectives, strategies and tactics. That model represents a systematic planning process of setting a goal based on evaluating risks and rewards, determining specific objectives to achieve the goal, devising a sound strategy to accomplish the objectives and executing appropriate tactics to implement the strategy.

That same structured process needs to be applied to selling your business, whether through business succession planning, outright sale of your business, recapitalization, employee stock option plan, management buyout, or other means of orderly transfer of ownership and protection of your equity.

Leaving an owned business successfully starts with you – the owner. Ask yourself a few critical questions and answer them honestly.

Are you financially and mentally prepared to sell your business?
How realistic are your expectations for what it’s worth?
How much do you know about selling a family-owned business?
Have you considered your exit options?
What are the current economic conditions?
How important to the continued success of the business is your participation?
How involved in the company are other members of your family?
What is the status of your estate planning?

Once you’ve given thoughtful consideration to these and similar issues, start on your exit planning. If your goal is to leave the business, what are your objectives? What is the best strategy to achieve them? What are the best tactics to use in executing the strategy? What barriers are there? And what resources do you need to overcome them?

Use the right advisor

Now you may be a great business planner, but, as noted above, you probably aren’t an experienced strategist for how to get the most value – emotional and financial – when you move on. Finding the right resource to facilitate your planning process is important. And the usual suspects aren’t necessarily the right ones.

Your accountant, attorney, financial advisor, stock broker, business broker, management consultant, and therapist may be great for their particular functional expertise in your business and your life. But none of them are necessarily qualified to work with you and other key players to develop a plan that addresses everything required. A B2B CFO partner has the required resources to help walk you through a successful strategy.

As John Leonetti said in his excellent book on exiting a business, “You need to seek out advisors who have a working knowledge of the complexities of exit strategy planning.” That means you need to do some thorough due diligence to identify who in your area has done successful plans and under what circumstances. Contact a B2B CFO partner to discuss your needs.

Give as much care to this selection as you would to a heart transplant, because that’s the emotional and financial impact of leaving behind what you have built, loved, hated, run and excelled at; what has informed and shaped much of your life and of those you love; what has filled you with pride and won you respect.

Both you and your company deserve your best thinking and respectful care when you part.

I would like to thank James Salter II for writing this article and allowing me to showcase his work by contributing it to my blog. Jim is a professional writer and can be reached at jsalter2@businesswriter.us