Posts tagged with: create financial value

Insights from The Owner’s Journey

The Owner’s Journey, a newly released study commissioned by US Trust, at the Eugene Lang Entrepreneurship Center at Columbia Business School, assessed and measured experiences and lessons from eight entrepreneurs who successfully sold or transferred their businesses to family members.

This whitepaper explores how founders or their successors created financial value in their businesses and prepared them for ownership change. Below are just a few of the early planning takeaways you can glean from their experience and apply today.

The stories of the entrepreneurs showcased provide rich insight to a wide range of exit options that worked for them:

  • Transferring ownership from father to daughter
  • Transferring ownership from a couple to their children
  • Selling to a strategic buyer
  • Selling a dental practice to a strategic buyer
  • Selling to a financial buyer


Introducing the report, Keith T. Banks, President of US Trust, Bank of America Private Wealth Management stated:

The most successful transitions require entrepreneurs to orchestrate finely tuned exits……Taking the time to initiate the planning process early is often neglected…. Without this planning, ‘business owners are often forced to exit on other people’s terms.’”

Early Planning for a Transfer of Ownership

Two-thirds of business owners who responded to the 2014 US Trust Insights on Wealth and Worth Survey do not have a formal succession plan. And for those who do have plans, many never ‘get around to’ implementing them.

With the greatly increased inventory of small businesses for sale (e.g. businesses listed on ) multiples for smaller businesses have been eroding. Smaller sellers are now lucky to receive only 1-2 times earnings equal to only couple years of the income they have been taking out of the business.

In the middle market, sales were robust in 2014 and are expected to be the same in 2015.

Exit Strategy Options for Owners of Privately Held Companies

For the purposes of this whitepaper, they considered these six exit options:

  1. Liquidation
  2. Bankruptcy
  3. Going Public
  4. Transfer of Ownership to employees management or partners
  5. Transfer ownership to family members
  6. Transfer ownership to financial or strategic buyers


The first two are acknowledged as being unappealing options. The last two are recognized as the most plausible options.


Other Insights from The Owner’s Journey

  • Not all businesses are saleable. Even long-standing, successful businesses will face challenges if they are not been deliberately managed for sale.
  • One family said: You must do the best you can to protect your assets, to protect your family. If nothing is done, one is leaving one’s situation to chance, the government and God.
  • One owner was so passionate about his mission and building the company that he had little thought for anything else. He never pondered the endgame.
  • Before one puts a business up for sale, one should streamline business processes and audit all costs and contracts.
  • Be as firm and detailed as possible in your letter of intent. It is the time to list everything that is important to you … The purchase agreement then easily flows from the letter of intent.
  • Find out how other deals were structured. Know your bottom line position. And don’t be afraid to ask for much more than your advisors recommend.
  • [My favorite] Start working with professionals years before you want to sell. Have a valuation done years before selling. Learn what you can do to make your company more valuable.
  • Unexpected things, both challenging and fortune, will happen. The trick is to be prepared for both.

Tips from experience

These entrepreneurs shared their hard-won advice on numerous topics. Every tip in the table of ‘Tips from experience’ is a golden nugget owners should take to heart. This advice is from the study participants, not advisors. Here are just the categories they cover:

  • Selecting advisors
  • Understanding the real value of your business
  • Selling a company is complex and can take time
  • An owner cannot always count on his/her children as the exit plan
  • When events move quickly


“The unknowability of the future bedevils every decision maker, not just those selling a business…. Planning can sometimes be difficult and time consuming, but it’s the best tool we have. And the earlier it is started, the greater the likelihood of a favorable outcome.”

The last point I want to highlight is not part of the study itself but what the advisors ‘caught’ along the way:

“Our advisors…were hearing a consistent and passionate message that early planning and enhanced education about exit options and the exit process were in great need.”

That’s our mission at This Way Out Group LLC. That need is growing daily. We help owners start planning early to give them greater exit options, choices and control; we prepare them for and guide them through the exit process (it’s not just an event). Call for a free consultation.

Here’s the link to the complete study on the US Trust website.

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