There comes a time when business owners want to, or are forced to, exit their business. There are a number of ways that they can make that happen. I have suggested to some business owners that they should build their exit plan when they start the business. Most don’t! And most don’t realize that the best exit could take years.
A friend of mine tells about flunking retirement. He also tells the story about having a major heart issue, and subsequently the business was not prepared for his extended leave of absence. My questions for you – Are you prepared for exiting? Are you prepared for a sudden or unexpected issues – like my friend?
Many business owners hold off on even thinking about those areas until they are so exhausted and fed up with the business that they do not have the energy to make the changes necessary. If they had been better prepared, they could have received a much higher multiple for their business. Most buyers are not seeking your job, they are seeking a real company.
There is a system to help you determine where to start: The Value BuilderTM System. It is a statistically proven model for predicting the value of your company. In 13 minutes, it allows you to obtain your “Value Builder Score” via a confidential survey. Your scores for each of 8 Value Drivers help you to determine where and what to work on.
The eight Key Value Builder Drivers are: Financial Performance, Growth Potential, The Switzerland Structure, The Valuation, The Hierarchy of Recurring Revenue, Monopoly Control, Customer Satisfaction, and Hub and Spoke. Using the assessment, your Certified Value Builder consultant can identify where you stand on each of these areas and tells what you need to concentrate on to get better. They have shown that this will greatly enhance the value of your company when you are ready to sell. However, some have found that when they make these changes, the business becomes enjoyable and profitable again, and they choose not to sell. Wouldn’t it be better if you had a choice?
If you want to have a lifestyle business, then minimize your dependence on other investors and structure the business to allow you to draw out cash as needed.
Other methods of exiting are:
- Liquidation – call it quits and close the door. If you liquidate, however, any proceeds from the assets must be used to repay creditors. The remainder gets divided among the shareholders–if there are other shareholders, you want to make sure that they get their due.
- Friendly Buyer – passing ownership to another true believer who will preserve your legacy. Interested parties might include customers, employees, children or other family members.
- Current employees or managers. Often in this kind of sale, the seller finances the sale and lets the buyer pay it off over time.
- Family – If you decide to go this route, you’ve got a lot of planning to do before getting out.
- Acquisition – invented so you can sell your business and leave the kids money, still spoiling them rotten, but at least sparing the business from second-generation ruin. If you choose the right acquirer, your value can far exceed what would be reasonable based on your income. How do you select the right company? Look for strategic fit: Which acquirer can purchase your company to expand into a new market, or offer a new product to their existing customers? If you’re thinking of acquisition as your exist strategy, make yourself attractive to acquisition candidates. Acquisitions can be messy and often difficult when cultures and systems clash in the merged company. Acquisitions can come with non-compete agreements and other strings that can make you rich, but make your life unpleasant for a time.
- IPO – IPOs are not only rare, they’re a pain in the backside. There is plenty written on this.
The answer to all of these avenues: Plan your exit and start doing it way before you think you are ready to get out. By improving these areas you will achieve a better business and richer life. Determine how much is enough and engage a professional to have them help sell it for you. Think about the fact that it takes a minimum of six months to make this happen. Many say you must be working on your exit for at least three years ahead of time to plan your exit.
Do you want out? Contact me. 612-805-7440 firstname.lastname@example.org www.bradlantz.com
Brad has been mentoring executives to strategically position their businesses and their lives for more than 25 years. His proven A2A system creates internal and external excellence and advocates. Brad’s ‘Results First’ business positioning program empowers executives to grow and transfer their leadership assets to develop better businesses and richer lives.