Exit Planning is a Fluid Process

Thank you to Partner, Larry Strauss for sharing this article:

As an owner of your privately-held business, you are the captain of your ship, so to speak. You control the rudder and the helm, steering your business in the direction of opportunity and profitability while also avoiding dangers that could ‘sink’ the enterprise. However, all sailors recognize they do not also control the winds and the tides. The best one can do is to understand these external forces and work with what they give you.

These external factors are a good way of viewing the same external events you cannot control with your exit planning. As these factors change you need to adjust your plans to accommodate what you cannot control to achieve a successful exit from your business. You see, exit planning – like sailing – is a fluid process and these external factors, the winds and the tides, will more often than not, be the largest determinant of success with your exit. Therefore, this newsletter is written with the intention of helping business owners better understand how to reconcile their internal and external transaction motives to achieve a successful exit.


A Simple Example  

Let’s begin with an owner whose business is doing well with record profits and this owner is looking to exit. Well, this owner has done a good job controlling their business results.

However, if banks are not lending because of the poor economy, or buyers are not buying, or global events are creating panic in the markets, or a recession has caused fear in the markets then some or all of these external factors will impact your exit plans. So, it is helpful to develop an opinion of these outside forces and adjust your exit planning around them.

Start at the Beginning – A Plan is Needed

Using the same sailing analogy, most sailors would not set sail for a destination without first charting a course to know where they are going, what path will get them there, and when and where they will arrive. Business is not too different – at least in theory. However, if you are a privately-held business owner who does not know who will own your business next or when the exit transition is likely to take place, then you are in the majority – most owners have not done this type of planning. There are many reasons why owners do not plan for their exits but like the sailor who is cast adrift without a map, you and your business can certainly regain your ground and position yourself within a solid plan.

Your Internal Perspective

Let’s begin with your internal view of your business and your role within it. In all likelihood, you are running a business that provides you with a job you like and with an income that supports the lifestyle you want to live. Again, you are controlling your own ‘ship’. And, after all, you’ve earned the right to think and act this way because you’ve overcome tremendous odds that were set against your business success. However, if you want to cash in on the value of what you have built, you’ll need to look outside of the confines of the walls of your small business and wander into the ever-changing world of the global economy and the market for buyers and sellers of businesses.

Developing an External Perspective

As a business owner who wants to monetize their privately-held business it is important to develop a view of the world of buyers and sellers of businesses. Further, it may be equally important to research the manner in which privately-held businesses are transferred to insiders, such as managers and family members. This external perspective is critical because the person who is going to own your business next may, in all likelihood, not currently work at your company. Worse yet, only a little bit of research is needed to find out the future buyer of your business is a part of an ever-changing acquisition world that is altering its focus on a regular basis. So, where your company did not appeal to these owners yesterday, it may seem irresistible today. The question is, ‘how will you know any of this without an informed view of these buyers?’

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