Kerri, Author at This Way Out Group - Page 24 of 25
“Most traders never plan or even discuss their Forex exit strategy. “
In the world of Forex trading, that’s what Pete Visconti says. In his world, traders pay more attention to their entry, setting up a good trade and timing profits. They forget or don’t look at the cost of not having a Forex exit strategy for each trade too.
As Visconti learned the hard way himself:
“Although, traders will argue which is more important,
you need to understand that they both are.
Just make sure they are planned and part of your trade plan.”
Analogous to his advice for traders to have a Forex Exit Strategy, here are my four points for Entrepreneurs/CEOs to plan your business exit strategy before you plan your market entry:
- Know What Your Business Exit Strategy Will Be BEFORE You Launch Your Business.
If you are in business and didn’t do this up front, you are already behind. It’s already harder for you to make good clear decisions about your business day to day, because you don’t know what your exit options are; what you are aiming for.
Therefore, if you don’t have an exit strategy in place, put exit planning on your critical exit strategy, path now to increase the value of your business at exit – whenever that may be.
- Consider Multiple Exit Strategies
When you lock down your exit strategy too soon, you eliminate the possibility of alternative opportunities providing even better solutions. When you maximize the number and variety of options on the table; you have more choices, more opportunities, and can make better decisions along the way
The sooner you start exploring alternatives open to you, the more control and more choices you can position you and your business to benefit from. The longer you wait and the smaller your exit window, the fewer options you can consider and reducing the value you can realize at closing.
- Always Initiate a ‘Stop Loss’ as Part of Your Exit Strategy
In the context of your business exit strategy, a ‘Stop-Loss’ is a contingency plan if things go awry and you must get out fast.
You have an emergency exit from the building. You have a backup of your hard drive offsite. You also need a plan for other crisis scenarios.
It could be an insurance policy, a backup successor, a backup exit plan that is not ideal, but fulfills many of your criteria and can be invoked quickly. It’s like having a co-signer on a key bank account or having a second key holder for your lockbox.
- Stick to Your Business Exit Strategy just as Conscientiously as Your Business Strategy
One of the biggest obstacles business owners face is getting distracted by the ‘new shiny object’. They get restless or bored working the sound strategy they are implementing and decide to shake things up without any stopgaps to protect them or the business. That lack of discipline can cost you your retirement and the business in the end. Revise it strategically if necessary. It’s in your best interest to trust your exit strategy and follow it with discipline.
Most entrepreneurs will skip these elements of laying out their business. Most CEOs will trivialize the importance of their exit plan in building the success of the business.
The flaw in that thinking is that business is all about making a profit.
Planning your business exit strategy from the outset is an imperative to achieve your goals for the business. Consequently, your daily decisions all lead to how much profit you achieve and what you want to do with the resulting profits.
Why would you ever want to sell your business? The best reason is that you’ve accomplished everything you set out to do. So when you sell, you want to be sure you’ve done everything to assure you command top dollar.
To sell your business for top dollar, be diligent applying these three strategies:
- Prevent Seller Neglect – Just because you’ve decided to sell, doesn’t mean you can neglect the business. You must do everything you can to increase sales, momentum, and customer loyalty right through the exit process until the transaction is done.
You must keep you eye on current and forecasted sales. Your buyer will pay more for the business with proven increasing sales and forecasted accelerated growth than for declining or stagnant sales with nothing new in the pipeline.
- Remove yourself from day-to-day operations of the business. You need the buyer to see that the value of the business he’s buying is in the business, not in you. To maximize the value of the business, you must demonstrate the business can be self-sustaining without your daily presence. They need to see customers, your team, your vendors engage and commit to do business with your company because of the business, not you.
To do that, train your management team to take on all your responsibilities (not cold turkey but over time). Build the infrastructure to support them to do everything you’ve always done. The more systems, structure, processes and procedures you have, the more valuable the business. You can monetize every operational task and responsibility that you delegate and transfer to your team.
- Reduce the personal perks and benefits you take from the business. There are many ways that small business owners can have the business pay for conveniences and luxuries. However, when it comes time to sell your business, buyers will be willing to pay well for your profits. So if you are taking money out of the business for personal expenses (legally), you are reducing profits. That’s not appealing to them.
When it’s time to sell, separate your personal and business expenses. Stop using the business to bankroll family dinners, vacations, cars, country club memberships.
Maximizing value is the key to selling your business for top dollar.
How do you know when you or your business are ready for you to transition out of the business?
How do you know when you should get out fast or hold on for the long-haul? What business model will help you maximize the value of the business? Here is a starting point for exploring and considering when and how you might exit/sell your business.
This CEO Exit Readiness Assessment provides a short set of questions to highlight your current thinking, decisions, issues and options to get out of business.
- Is your business ready to be sold?
- Are you ready to get out, leave the business and move on to your reinvention?
- Who will buy your business – and what form will the transaction take: trade, cash, management buyout, private equity, VC, Employee buyout?
- What sort of seller will you be?
- Do you have the right team in place (staff and management)?
- Do you have the right set of expert advisors on your team?
- Do you know what it is that you don’t know? How do you know that you don’t know?
- Have you already planned your reinvention after you exit your business?
There are more questions to consider. Your answers here give you a baseline to begin developing your exit strategy and plan the steps and timeline to exit or sell your business.
From the outset of your business, start asking these questions as part of your strategic planning at least annually if not quarterly. Keep a log of your evolving answers as the company grows, your role changes and your team matures.
When you tie your long term goals for the business and your role to day-to-day decisions, you will make better decisions, faster, easier, with less complete information while minimizing risk.
To avoid exit planning errors and pitfalls that could potentially derail your exit transaction, email me with any questions you may have.
Continuing on with questions about your exit strategy, here are three more questions to help you explore the bigger picture and opportunity your business offers if you start planning early.
- What do you need out of a transaction or transition to have the financial independence for your next venture/adventure/retirement?
This is really two questions and to answer the first half, you need to answer the second half first.What will you do next? Do you have a plan? Do you have a project, venture, hobby in mind? Will you travel for 2 years and then build a house up in the mountains? Will you go back to school as a student or professor? Will you volunteer?Your plans for your next steps or avocation create the baseline of your financial requirements from any transition or transaction you decide on. Think through your aspirations for the lifestyle you want and the goals on your bucket list you want to fulfill once you exit this business. Clarify what you’ll be doing and what it will take to fund your financial independence. That will set some parameters on your company valuation and the structure of your exit to ensure your future.
Run the numbers so you know how much you need from the deal so you know with relative certainty that you can pursue and achieve your life’s goals. That has to include basic living expenses, health care costs, long term care costs; and any education funding for children or grandchildren, travel costs, replacement vehicles, vacation home, weddings, philanthropy, legacy planning, or tax liabilities.
- Do you know what your business is really worth on the market?
You need two numbers. In the end it’s up to you to make sure they match.
You need to know how much cash you need to take away from the sale of your business, regardless of the form the transaction takes. And you need to know with brutal honesty the market value of your business – what it is actually worth, not what you think it’s worth.
Market value always trumps what you ‘need’ out of the business. Don’t get trapped into terms you don’t like because you were only looking at the valuation number. Use independent experts to value the business before you get locked in during a negotiation. They can often show you some strategic changes to increase market value in your favor.
- What should you be doing now to minimize your future tax liabilities?
Don’t look at taxation in isolation. Revisit your business plan now and consider the tax implications for your growth curve. Expand your strategic planning to include contingency planning, succession planning, transition planning, and then run some financial models to see which options look most attractive for your future.
Whether you intend to sell your business in the next couple years, or you’ve set a date 5-10 years from now, it’s never too early to start the planning process. Planning now will help you clarify your ultimate goals you are aiming for. The business will be the primary vehicle or source of funding to provide financial freedom so you can achieve every goal you set.
Most business owners will see the title here and skip the whole thing. After all, they’re too young and too busy in the business to answer questions about their exit strategy. Why should they start planning their exit strategy now?
You’re not one of them. That means your eyes have been opened to the imperative of thinking about your exit from the outset – or at least from today forward.
You realize that you have no intention of working this hard for another 5, 10 or 20 years. You’ve built a business you are proud of, that rewards you nicely today and you want to be able to walk away on your terms on your timeline.
Sounds simple and reasonable. But for many logistical, emotional, and financial reasons, it can’t happen overnight. Unfortunately, most business owners neglect the topic, don’t consider the decisions, and leave the process to the last moment. Unlike their decisive leadership that got them to this point, they’ve sidestepped the following questions for various reasons. You don’t have to.
There are five key questions about your exit strategy you do want to spend time considering, and exploring the tradeoffs of different answers. Sometimes the answer to one dictates the answer to others, but if that one answer changes, you open up other latent possibilities you’d never thought of before. When you lay out your answers to these questions, you will be in a better position to take timely steps and integrate all the necessary elements for your exit. You will be in control of effectively negotiating a successful business transaction to achieve your optimum exit.
Here are the first two questions about your exit strategy:
1. How much longer do you want to be actively involved in the business?
Vague answers like ‘at least 5 more years’ are a way to avoid the question. Dig deeper. Maybe it’s easier to look at what you want to accomplish in the business before you’re ready to walk away. This date is important because it triggers every other action, trigger and date along the way to get there.
Most successful exit transactions take long-term strategic planning. They can’t and don’t come together in 60 days. You must start the process before you ever thought it would be necessary because it takes far more time than you imagined to line up all facets to suit you.
To maximize the value of your business when you do exit, you need to have a clear goal for the company and for your own/your family’s future.
2. Who will be your likely successor?
Have you thought about who should be your successor? Should it be your children, one of your children? Should it be your employees? Or would you look for a buyer well-suited to the business, who can take it to new heights? Maybe you think it’s in your customers and staff’s best interest to be acquired by an industry giant or your biggest competitor?
There are many options. What’s optimal depends on you, your goals, your industry, your company culture.
I’ll post the other three questions you need to answer shortly.
How do you select an attorney? How do you select a CPA? How do you select an M&A Advisor or a banker?
For each member of your exit team you’re looking for experience, credibility, project management, confidentiality, communication, cooperation, a systematic process. That’s equally true for your exit strategist who will help you stay focused on your exit goals, explore your exit options and help you get out so you can move on to your reinvention (fka retirement).
For anyone who says they can do the exit planning piece for you, here are five core questions to make it clear to you what they will do for you.
- What is your specialty? What is your core business?
Your current advisors probably do an excellent job of helping you build and grow the business, the objective when you hired them. Is their core business helping you exit or is it to fulfill some other core objectives for the company?
- How will you charge me for exit planning services pre and post transaction?
If you engage your licensed expert (attorney, accountant, tax advisor, insurance broker, wealth advisor, business broker) to guide you through the exit process starting years before the transaction, how would they charge you for that new service? Would it be at the same rate as you currently pay them for their licensed expertise, or some other formula?
- How engaged will you be in my operational implementation and transition up to the transaction?
You need to know if they will be telling you what to do or helping you complete those tasks to prepare the business for sale.
- Will you help me assess exit options and timing/tax/liquidity impact of each?
The greater the lead-time, the more exit options you have. Will your advisor work with you 2-5 years in advance of your targeted exit to explore those options?
- What will you do to assist me in determining my reinvention plan and my goals and lifestyle beyond the business exit?
You increase your likelihood of a successful and prosperous exit transaction when you have a clear reinvention plan spelled out of what’s next. Will your exit strategist assist you to explore opportunities and identify criteria, needs and goals that the business exit will allow you to achieve?
You need an exit strategist who is focused on you, your goals, your exit, your transition.
You want an exit strategist who has years of experience focused on exit planning and the strategic transition (not just the transaction).
Do your due diligence on every member of your exit team, starting with the quarterback – your exit strategist.
P.S.To avoid possible pitfalls that could potentially derail your exit transaction plans, get your team on board early. Please contact our office if you would like to discuss your objectives and timeline in confidence.
The question isn’t what to do. You already know that. It’s actually doing it that’s the problem.
Below are the typical excuses for not doing what you know you should, even if you’re highly motivated, even if you want something very badly, and even if you know exactly what you need to do to get it; if you’ve got these internal circumstances operating, you AREN’T going to be able to do it.
The 10 of the most common excuses for inaction, include:
Excuse #1: “I’m too stressed out.”
Excuse #2: “I don’t believe I can.”
Excuse #3: “I don’t have the time.”
Excuse #4: “I don’t have the energy.”
Excuse #5: “I’m too emotional.”
Excuse #6: “I’ll always be the way I am.”
Excuse #7: “I’m afraid I’ll make a mistake.”
Excuse #8: “I’m too sick.”
Excuse #9: “I’m too skeptical.”
Excuse #10: “I can’t do it alone.”
Whatever your particular challenge may be, if you can identify with the challenge of knowing what to do, but still not doing it, then I’ve got life-changing news for you.
These typical excuses can effectively paralyze you — making it virtually impossible for you to take the actions needed to create the change you know you need to, to exit your business on your terms, on your timeline.
In other words, even if you’re highly motivated, even if you want something very badly, and even if you know exactly what you need to do to get it; you’ve set up the barriers and you AREN’T going to be able to do it alone.
You can overcome every excuse, every barrier to get to where you want to be at the end of the year. You know where you are and you know where you want to go to make the next 2-5 years your best years yet. Make it happen, and break through every excuse, every justification going through your head so you can get out with the financial freedom for your reinvention.
It’s a big step to decide that you will hire an exit strategist. When you decide you want an exit strategist on your team, you want to hire someone who will help maximize the value of your business and prepare your business for sale or succession. Here are ten fundamentals to qualifying your ideal exit strategist.
- Hire someone who has done what you set out to do (e.g., launch a new product line, bring in $10M new revenue, streamline production to eliminate all late and lost jobs) to maximize the value of your business.
- Work with an advisor who has built businesses, has taken leadership, ownership, and accountability to get things done; hired the team and has risked everything themselves.
- Work with an advisor who teaches you more than one way to get things done, so you can customize the learning to you, your team and your company.
- Work with a mentor who will sit with you to collaborate, rather than a consultant who keeps himself or herself apart. You need someone so engaged in your company and committed to your goals they are always thinking of better solutions for you.
- Work with an authority, someone who gives you ideas one-on-one to run your business more effectively. Work with an authority who also offers training programs you can provide to your entire team to increase company valuation.
- Work with an advisor who is a peer, who teaches you at your level. You want a mentor who understands your size business, your industry, your challenges, who recognizes and values your objectives.
- Decide if you want an expert in marketing/sales/service/HR/finances to solve a specific problem in one area; or if you want a mentor who will help you oversee the entire operation to institute and/or refine business fundamentals.
- Decide if you want to give away your core value to an outsider to get a task done; or if you want guidance and direction from a virtual partner who will help you integrate systems and strategies to take your whole company to the next level so you can achieve the financial success you know is possible.
- Decide if you want to hire a trainer to get you started in a specific skill set; or if you want to hire a mentor who will stick with you to achieve very specific results, in this case an exit on your terms, on your timeline.
- Do you need information that a one-time consultant will produce? Or do you need the ongoing insight, experience and expertise of an exit authority to turn information into knowledge you can integrate into your business, adding value every day?
Your exit advisor is central to your successful sale, scale or succession plan.These fundamental qualifications are essential.
Most owners and entrepreneurs never get to liquidate the assets in their business. It’s true. Here’s why:
- 95% do not plan how or when they’ll get out. They postpone, procrastinate, avoid and deny the need to plan their exit. We’ll get into more statistics later.
- Without a contingency plan, the family often cannot pick up the pieces and keep the business viable.
- Without a succession plan – a buyer can’t see the value in the business without you.
- With all the effort that went into starting and building the business, there was no forethought on how to get out, how to get their wealth out, how to transition to their reinvention.
- Even with a team of expert advisors, the owner has never had a joint discussion with all of them to develop an integrated selling strategy.
When it comes to your exit essentials, let me tell you the questions I would ask and the questions I doubt if you would think you need to ask that you should….
In my whitepaper: Don’t Murder Your Business, I raised awareness of the four key flaws that challenge all CEOs. I also identified three broad areas of blinders that CEOS/owners/leaders put on themselves, often without recognizing them. I won’t repeat them here, but you can get a copy of this whitepaper to the right of this article.
However, it is essential for you to recognize your own excuses that prevent you from doing what you need to do now to get what you want when you exit.
Not taking action is can be as restricting as settling into habits you can’t break.
Inaction can become a general habit that causes you to:
- Leave unfinished projects lying around your office
- Do meaningless busy-work instead of important money-making projects
- Wait until the last minute (or even later) to file your taxes
- Sometimes pay bills late
- Show up for important meetings after the program starts
- Make a to-do list, and then ignore it
- Intend to make a budget and a marketing plan for the year and never get around to it
- Set annual and long-term goals that would prepare the business for your exit, and never use them in operational decision-making
The question isn’t what to do. You already know that. It’s actually doing it that’s the problem.
If you have any questions relating to exiting your business, please email me. I’d be happy to assist in whatever way I can.
CEO Supersaver Summer Offer
Save 40% Offer ends Sunday, July 15
It’s never too early or too late to plan your exit.
There’s always a lull in business from Independence Day through Labor Day
when many people take advantage of the season to get out of the office and take vacation. Myself, I just returned from almost two weeks on Cape Cod.
As a result, operationally, things are a bit easier to manage over the summer.
I want you to take advantage of the freed up time to dedicate just
one day to planning how you intend to get out.
Instead of putting it off one more time, like 95% of all business owners do,
I want you to start planning for your reinvention this summer.
I also wanted to make it easy, quick and painless.
Act now. This offer expires Sunday, 7/15.
A One-Day Exit Planning Consult
We work through a tightly structured exploration of your exit strategy to identify and outline business goals, timelines, lead-time requirements, criteria, risks, options, the required team & your definition of reinvention; to ensure you can get out on your terms on your timeline.
You walk away with worksheets, assessments and a template you can revisit periodically. You have a personal exit strategy to drop into your business plan. Whether this remains private or you share it with your team, I guarantee you will be better prepared for any exit opportunity that comes your way.
It’s all about results. CEOs who spend a day with me one-on-one:
- Establish a clear idea of where they are going and why.
- Know their ‘number’ (to get out).
- Have an equation to calculate the value of their business now.
- Have a timeline for exit decision making —
[This is the Secret the transaction experts WANT you to know but no one tells you: It takes 2-5 years to exit successfully!].
- Understand the tradeoffs between how to get out and the terms of their exit.
- Start exploring and planning for their reinvention beyond the business.
- Walk away with all the answers, insights and decisions made to complete a 10 page exit plan they can slide into their strategic plan ready for implementation.
Some of your benefits of spending one day (or two half days) on exit planning:
- Easier/simpler to exit when you want and how you want to
- Avoid hurdles, obstacles and risks
- Leverage results early
- Low upfront cost, low risk effort
- Business is easier/more attractive to sell
- Business stability and continuity secured
- Clarity, confirmation & incentive to build out your business towards your ideal exit, and move on to your next steps/reinvention
- Increase value of the business, making it more appealing to a strategic buyer
- Expand exit options
- Stronger negotiating position whenever a potential buyer inquiry comes along (maybe years earlier than you thought possible)
Bankers and attorneys have valued this consult at $8,000.
As a virtual consult (no travel) I offer it for $2,500.
This week only, I’m offering the same one day consult
(to be booked for July or August) for just $1,497
(that’s another $1,000 off).
Must be booked and paid for by Sunday, July 15.
Is this of interest to you or CEOs you know?
Email me now to take advantage of this offer.
Forward this email to anyone you know who needs to start planning their exit now— that includes every business owner who has even an inkling of selling/scaling or grooming a successor in the next 2-5 years.
Fact: If you do not have an exit strategy yet, you need to start planning now.
Book Your Private Consult Now.
Plan Your Exit From The Outset
- 95% of all business owners have no exit plan
- 90% never scale, sell or pass the business to a successor
- CEOs walk away with only 50-70% of the value of their business.
- Because of a lack of planning by sellers, buyers have more leverage in the selling
Don’t be one of them!
Call 508.820.3322 or email me now.