Posts tagged with: cash out
Are you uncertain about the future for you, your family, or your business? If so, your instincts and intuition are on target – you can’t afford to ignore the facts. There’s an unavoidable confluence of factors that require your immediate planning and action.
- Sellers’ Competition Increasing – 8.1M Baby-Boomer Business Owners think they will sell/scale or in some way cash out of their business by 2018. It takes 2-5 years to prepare the business so you can achieve the maximum returns. Another 8.1M Baby-Boomer Business Owners intend to sell in 5-10 years. Anyone in the first group who was slow to market will now compete with an added group of 8.1M peers – likely even more desperate to get out quickly and seeing how difficult it was for the first group of Baby-Boomer Business Owners to transition.
- Seller’s Window in the Market is Shrinking – 2013-2018 is a seller’s window (sellers have the advantage in a transaction, buyers have the liquidity, and this is the leading edge of a huge selloff/transition of ownership across industries). If you wait too long, you’ll miss this window. In 2018, the market itself flips and becomes a buyer’s market until 2022 (buyers will have the dominant advantage in a transaction, there will be even more sellers than buyers, and buyers will have more choice and can drive prices down).
- Inflation Will Wipe Out Any Leverage – Quantitative easing will not solve the US debt problem. The only option the government has is to allow inflation to rise – some say up to 50% – in order to wipe out the debt. Inflation, which is being held down artificially, will rise to heights we have not seen since the 1980s within the next five years. After that, inflation will wipe out any leverage or advantage that sellers have in a transaction.
- Longevity – In your retirement and investment planning, your business will likely be a dominant source of the cash to fund those plans. Do your reinvention plans assume you’ll live three years beyond your exit? Until age +/- 85 as some of the newer data suggest? Or do you want to be on the other end of the curve suggested in a recent TV commercial by Prudential and live to 100 or 110? The bigger question then becomes, have you indeed made adequate plans for your resources to provide for the lifestyle you want for another three or four decades? Or to leave a legacy that will last another 100 years?
There’s no denying these trends are happening. As much as business owners are taking a beating from all these factors, a wait and see approach is about as effective as hiding your head in the sand like an ostrich. Rather, look at these external factors as a warning bell to plan now so you get to cash out and move on to your transition on your terms and your timeline.
It’s never too early or too late to plan your exit. At Exit This Way, we can help you through this minefield with strategy, tactics, and much more, the sooner you call.
As Rich Schefren says:
“Big business always ‘beats up’ and steals the lunch money of the small independent operators.
And if you know anything about business or have witnessed the birth or growth of an industry you have already seen the pattern play out
time and time again.”
When you know the value of your time, when you know your worth in the market, it changes how you think about time. It changes how you think about free time, family time, vacation time, and beyond.
- Do you know what your time is worth?
- Do you know what your time needs to be worth to achieve your income goals?
These two are starting points. You need these two answers before you can make effective decisions about what activities you should spend your time on and what activities to delegate, outsource and automate.
It also takes discipline, learning new habits, and teaching those around you to value and respect your time. If you don’t value your time, no one else will. Therefore, your time management and concentration on your most valuable activities – or lack of either one – may be the reasons your business is not generating the desired income or growing. Yet you still might be working harder and longer than you want, with no end in sight.
This should be a wakeup call to use your time more wisely: eliminate switch-tasking, stop multi-tasking and hone in on what you do best. Your most important skills add value to the business every minute you are working. You must discipline yourself to focus on your most valuable activities, schedule everything you do, and delegate everything else. This will continually increase the worth of your time and add value to the business, enabling you to achieve your ultimate goal – cash out on your terms on your timeline.
To achieve your ultimate goals, to join the 5% of businesses that get to cash out on their terms and on their timeline, you must focus on building a real business and be aware of a few of the barriers that can set you up for failure.
There are two often contradicting approaches to building business.
The most common approach, the Idea/Opportunity approach, takes no training, no lead-time and requires minimal cost. If you are an opportunity seeker (a term coined by Rich Schefren), you may leap in and try to take advantage of an idea ahead of the curve, hoping to catch the wave as it hits the market. Often this approach is about the product or service itself, not the need it may/may not fill in the marketplace. I’ve seen this with many software companies and restaurants. Just look at all the iPhone apps these days. Or look at how short-lived most restaurants are (measured in months not years).
This is a hit-or-miss approach because the market window can be very short or even fizzle before you get to market. And while you’re focused on creating your offering for that niche, another better opportunity can come along. If you’re always looking for the brass ring, you’ll always be tempted by the next “new shiny object” and not finish what you start. This is the trap most entrepreneurs succumb to, leading them down a path that ends in failure.
There’s another approach to starting and building your business. It’s a more disciplined and Strategic Approach that addresses a problem and provides a solution. If you are a strategist like me, you start with your end goal and your vision of what you are building toward.
Across the board, the most successful entrepreneurs take the time to be thoughtful upfront and prepare options, offerings, alternative approaches, competitive research, market opportunity and team requirements to achieve their goals. They do their homework; they research and plan first.
They take the time to continually and consistently ask the question:
“What are the best opportunities to achieve my vision of
where I want to take my business and what it will become?”
They know they must continually “sharpen the saw,” as Stephen Covey tells us, and raise the bar all the time.
So the primary obstacles to achieving your business success are not in your experience, education, expertise, funding or financing.
Your primary obstacles to the business success you desire and the outcome you want to achieve are the mindset and skill set you bring to the game.
QUESTION: If the strategy for ensuring a successful exit transition is that simple and clear, why do only 5% of all businesses get it done?
ANSWER: The other 95% know what to do. They know they should do it. However, they don’t follow through. They lack the mindset and skill set of a strategic CEO who truly wants to build a wealth-producing business.
Which one are you?
Irrefutable statistical evidence confirms that business owners are not prepared for the current market window to sell a business 2013 – 2018.
To take advantage of this sellers window, business owners need to get started formalizing a strong business foundation (e.g., strategic planning, contingency planning, succession planning, transition planning) at the same time as they balance accelerating growth and optimizing value in the business itself.
The research to date suggests that most business owners do not believe this strategic effort is important for them, their company, their team or their family’s future. Just to recap:
- In a 2008 research report entitled Business Transition/ Succession, research by ROCG Americas LLC confirmed that CEOs lack urgency because of the belief that “we can always do it tomorrow – a general feeling of invulnerability.” Survey participants’ No. 1 excuse for not having a written plan is still the same in 2013.
- In the Canadian Federation of Independent Business (CFIB) survey in 2005, “the No. 1 reason given for not having a written plan was that it was too early to plan. This reply was head and shoulders above every other reason given.” Yet, this feeling is contradicted by the facts which show that time is not necessarily on the side of the selling owner.
- Findings by the Mutual Survey of American Family Business in 2007 confirmed the statistical lethargy: “Almost a third have no plans to retire, ever; and another third report that retirement is more than 11 years away. Since the medium age of the current leaders is 51, this means that many people plan to die in office.”
- PricewaterhouseCoopers states in its 2007 report on Canadian businesses succession plans that owners over age 50 “seem unwilling to seriously look into options to transition ownership before they are forced, by age or illness, to give up the business.”
- A full 34% of the CEOs over age 60 in the ROCG 2008 study felt that it was still too early for them to plan their exit!
This “feet first” plan of going out with their boots on (providing no liquidity event, no succession planning, and no future for employees when they close the business) is prevalent. Not planning for the inevitable is equally absurd and irresponsible. And yet this is what 95% of all business owners do.
They are murdering their business. And it is totally preventable.
Change does not come easy or fast. To truly maximize the value of your business and walk away with the highest returns, you need to commit to a 2-5 year timeline that gives you the leverage you can’t get after a trigger event (health, family requirement, corporate or market changes, etc) precipitates your exit.
It’s never too early or too late to plan your exit. Our team at This Way Out Group LLC will take away the fear and frustration and facilitate the exit process and timeline with you.
When you started your business, your whole focus was to get customers, generate revenue and try to make a profit from what you love to do and what you are very at.
It’s never too early or too late to plan your exit. Think about your options now, whether you plan to cash out in the next couple years or in a couple decades.
Every business owner has 3 OPTIONS of how they’ll get out.
- The first option is the default that over 95% of all business owners choose. That’s to do nothing, exit feet first and leave your family to muddle along or liquidate the business as best they can to pay your estate taxes.
- The second option is a bit better. That’s the standard option of paying a fee (e.g., $50K+) and a commission (3-10%) upon sale with an outcome that can pay you the owner a modest multiple (x) of your operating profit 6-10 years from now.
Have you thought about this as a viable option?
Do you want to wait that long?
Do you have the drive to continue growing the business another 6-10 years?
Is that the return you were looking for?
Can you finance your reinvention on that?
Is it close to your Number?
Are you aware of how this works? I want to make sure you know about it – but I think it’s an option that favors the buyer. But you need to know what it is to know if it is distasteful for you.
Alternatively, did you know it’s in your better interest to exit early, that when you exit in the first 3-5 years your ROI is greater? And right now, if you exit in the next five years (2013 – 2018), it is optimal timing to hit the seller’s market, instead of the buyer’s market if you wait more than 5 years (beyond 2018).
3. I offer a 3rd option for how to get out. My way is more pro-active and
measurably more expensive up front.
My approach helps owners optimize and leverage results early.
They can exit 2-4 years earlier, potentially realizing 4-6x operating profit,
- Take my 3rd option and get out four years earlier, with a higher multiple of EBITA in cash, with systems, structures and wealth preserving vehicles in place to maintain the lifestyle and benefits your business has provided, or
- Take the standard option of a lower multiple in 6-10 years when it will be a buyers’ market.
Here’s how I make you succeed. I take a comprehensive strategic approach with only one objective, to help you the selling business owner get out on your terms on your timeline. This is all I do.
When was the last time you thought about how to cash out of your business?
Is it a topic you avoid? Do you only think about it when you are at the end of your rope after a really bad day? Is it a black hole you know nothing about?
Or do you include the long-term impact/implications in every decision you make? And tie every short-term decision and strategy to where you want to end up so you can cashout?
HARVEST YOUR WEALTH gives you the foundation for all those decisions in bitesize pieces so you can start planning early, to get out on your terms and on your timeline.
It’s never too early or too late to plan your exit. But you must make a plan and start executing on it now if you intend to cash out of your business to cash in those plans for reinvention (what comes next).
Start here, http://harvest-your-wealth.com
HARVEST YOUR WEALTH is for business owners who need to start thinking about how to sell, scale or pass on a business to successors. It’s not for advisors, transaction experts or buyers and their agents. It’s for you, the business owner who has put their life, spirit and soul into the business.
It’s only when you cash out of your business, that you can begin to cash in on the future of your dreams. To pursue that reinvention, you must have a plan to get out with the maximum value you can achieve for your business.
This Way Out Group LLC announces the release of HARVEST YOUR WEALTH – Exit Essentials for Your Business by exit strategist, author, speaker, and radio host, Kerri Salls to help business owners cash out of their business so they can cash in on their future.
FRAMINGHAM, MA (January 21, 2013) – This Way Out Group (http://thiswayoutgroup.com), the break-out boutique services firm providing comprehensive collaborative exit planning services announced today the release of HARVEST YOUR WEALTH – Exit Essentials for Your Business (This Way Out Press $17.97 on Amazon) by CEO and author, Kerri Salls. HARVEST YOUR WEALTH – Exit Essentials for Your Business educates and prepares business owners to monetize their business on their terms when they plan to get out, instead of simply shuttering the business and walking away. Only when an owner prepares the business for a clean, solid, and profitable exit can they expect to cash out of the business to cash in on their future. Written by expert exit strategist Kerri Salls, HARVEST YOUR WEALTH reveals the secrets the transaction experts want entrepreneurs to know before selling a business, but no one has been telling them until now.
In HARVEST YOUR WEALTH, Salls introduces the 95% of all entrepreneurs and owners who do not have an exit plan for their business to the decisions, choices, options and opportunities they need to know about years before they decide to get out of their business. She advocates for early exits, especially over the next five years for baby boomers.
Salls says, “HARVEST YOUR WEALTH gives the owner/entrepreneur more control and leverage getting out. Plenty has been written on starting and growing a company. Very little has been written on exits, on monetizing that investment to be able to get out. What has been written has focused on the financial and legal side of the exit transaction or from the advisor or the buyer’s perspective.”
Less than 10% of business owners who put their companies up for sale actually get the deal done. (2010 Survey of Brokers and Buyers by MidMarket Capital) “[Exiting small business] owners are preparing for the deal of a lifetime with possibly zero experience.” (MorganStanley SmithBarney publication, 2011) [via Blackbridge Newsletter 2011]
They think they’ll be able to sell when they want for what they want with no lead-time or preparation of the business, the team or the business owner. That’s a diet of hope and promises that will satisfy no one. Because of a lack of pre-planning, 95% of all business owners are leaving up to 50% of the value of their business on the table when they exit.
In this book, Salls focuses on the needs of owners to make their business buyer ready and buyer attractive; on exit planning from the seller’s perspective before the transaction experts, or the buyers come into the picture. The urgency for baby boomers to act now cannot be overstated.
HARVEST YOUR WEALTH provides steps, checklists, assessments, questions and exercises all business owners must consider in order to take control and achieve their goals in the business and beyond. Salls provides the resources, tools and insight to encourage entrepreneurs and business owners to, as she says, “Plan their exit from the outset.”
Salls started her career in the Peace Corps in West Africa and then spent a decade accumulating multi-million dollar corporate achievements before launching her first business in 1988. She has been active in business strategy and exit planning for 40 years.
This Way Out Group LLC [http://thiswayoutgroup.com] has been refining and applying a holistic system to assist business owners since 1999 specifically to help owners transform an income generating business into a wealth-producing machine so they can sell or scale the business on their terms on their timeline. Partnering with the business owner 2-5 years before their expected exit, we help established and hyper-growth companies prepare for and achieve their optimum exit strategy. We help owners to accelerate sales, optimize growth, and maximize value to make their business buyer ready and buyer attractive so they can get out and move on to the next venture, adventure or avocation.
HARVEST YOUR WEALTH – Exit Essentials for Your Business is available at Amazon and other outlets or at www.harvest-your-wealth.com.
TO ARRANGE INTERVIEWS OR MEDIA/SPEAKING APPEARANCES CONTACT:
It’s good advice to appoint key advisors in the sale process as soon as possible to reduce costs and get ahead of the sale. However, it is also imperative for you, the business owner, to do your part long before you bring transaction experts to the table.
Develop and discuss with all your advisors, a recap of what business you are in and your reasons for selling. It is your business and you know it better than anyone else. It’s up to you to communicate your goals for the business, your team and your objectives getting out.
a. Initiate due diligence proactively. It shows potential buyers you’re serious and committed to the sale. It also will identify area, concerns, risks that can reduce your potential sale price. For example, unpaid taxes, incomplete financials, employee contract terms.
b. Define your ultimate exit strategy, which can also uncover potential opportunities to increase or decrease the value of undocumented and unregistered intellectual property.
The bottom line is that your business needs to be prepared for the sale or other exit options at all times, which involves organizing all aspects of the business to be appealing to a buyer.
You must put yourself in your potential buyer’s shoes to take a critical look at your own business. If not, you risk not achieving your best outcome, leaving money on the table.
Taking time to understand the drivers inherent in a potential buyer’s business can help you position your business to be buyer attractive and achieve a better sale outcome.
Why Don’t We Use Tools To Track And Measure The Profitability Of Our Efforts?
Why Don’t We Track And Measure Every Effort With Prospects And Clients?
The answers are many, wide-ranging and constant. We:
- Are Too Comfortable
- Are Resistant to Change
- Assume it will be too complicated/complex even before considering options
- Presume all this is prohibitively expensive
- Supported in our old ways that keep us out of control, overwhelmed, paralyzed, in a rut
Which ones apply to you?
If you have not cashed out at your target number, at least one of these blinders may still be in your way.