Posts tagged with: exit criteria
You can exit your business on your terms so you can transition to the lifestyle of your dreams with the wealth to pursue your reinvention (venture, adventure, avocation, hobby, retirement)
But what you can’t do is assume you can simply hire a team of experts and just walk away from your business in the next six months.
Start with your exit criteria to achieve your ultimate goals as you transition to your reinvention.
• Freedom — What does freedom look like to you when you exit your business, after the exit transaction is complete?
• Control — Who’s in control of decisions, strategy, budget, operations, and sales now? Who will be in control of each area of the business when you exit? Have you transitioned the decisions and control to one person, to a team of leaders or to no one leaving a vacuum in the business?
• Wealth — What is your wealth requirement for your reinvention and lifestyle after you exit? How do you define wealth? How much of the wealth you need for your reinvention must come from the business? Can you liquidate the business to produce that level of wealth to achieve your other exit criteria?
• Liquidity — How much liquidity do you need immediately when you exit? How long can you wait to receive final payment?
• Timeline — What is your ideal timeline for your exit? For your reinvention? For liquidity?
• Legacy — What’s your definition of the legacy you want to leave behind? What do you and your business stand for? What do you want to be remembered for? How can you achieve that?
• Dynasty — Do you want to build a family dynasty? What would that look like? What do you have to put in place to realize your dynasty?
When and how long to spend on strategic planning depends on the company itself. At a minimum, any company serious about achieving goals, must allocate time for long-term planning, goal setting and review on a consistent annual basis. This project must be sacrosanct.
Especially, if you are already within the 5 year window of your target exit date, there can be no exception, no excuses for not doing strategic planning.
Your annual strategic planning should tie every goal, every system, every budget and hiring decision to your exit criteria and timeline. Following this strategic plan will help you position your company as one that ideal buyers will be eager to scoop up – maybe even before your target date.
But strategic planning is not just an annual event. You must then roll it back into goals, planning and tracking each quarter, each month and each week. At this granular level, your strategic plan will drive every decision, every expense and every task each employee works on thus increasing productivity and value daily.
To ensure your planning is done in a very comprehensive and detailed fashion consider the following guidelines. Implement your strategic planning process at each of these milestones
- In the third quarter for the following fiscal year.
- In preparation for a new major venture, for example, a new department, new product, new market channel.
- Action plans are updated to be sure objectives, responsibilities, time lines and budgets are on course.
The attorneys report that historically,
only 10% of all the deals business owners want to implement, actually get to the closing table and get done.
The list of reasons why they fail is lengthy. It comes down to the owner’s preparation and stamina in mindset and skill set to get the job done.
An implementation is the realization of an application, or execution of a plan, idea, or policy. To implement a plan (e.g., a strategic plan, an exit plan, or a succession plan) is to carry it out, to accomplish all the details of the plan. When you commit to implement a plan or strategy, it’s a commitment to ensure the fulfillment of that plan by specified concrete measures.
A strategic plan and an implementation plan are not the same thing. The strategic plan tells you what to do, why, when and the budget to do it. The implementation plan spells out the details of how, the resources, timeline, requirements, etc. They are two sides of your exit planning to think through.
The key to your successful exit is implementation. Full implementation of your desired exit option, to transition to your reinvention, requires following through on a detailed, well-constructed plan. Your exit plan has many moving parts. You must constantly orchestrate all of them. Internally, you must coordinate your team, successors, experts, vendors, clients, budgets, prices. You must align the company goals, market value and corporate objectives with your personal exit criteria and priorities. Executing your exit plan cannot be delegated or outsourced. You must take charge of every step of this implementation to ensure you get to the closing table on your terms, on your timeline.
The challenge to your successful exit is also implementation. It’s a big load. Often, most of the pieces need to stay confidential and independent of day-to-day operations. Balancing your exit with daily operational priorities can be distracting and exhausting. I believe that implementation is where most business owners buckle under and can’t get the deal done because, from their point of view, there are:
- Too many balls to keep in the air
- So many new once-in-a-lifetime decisions to make
- All the changes to make in the business, in their leadership and in their business model
- So many different experts to bring up to speed – all charging full rates
- All the contacts and negotiations that take longer than anticipated
Moreover, there’s the loneliness and isolation of working through this process which takes years, especially when you try to do it alone. Our clients at This Way Out™ Group LLC appreciate the support of a virtual partner at their side through the whole process.
Exit planning is a whole new job that you never had before and you’ll probably never have again. Your exit mindset will decide if this is a rewarding experience leading to the lifestyle of your dreams or a traumatic experience that wears you out even before close the deal. You need an exit mindset shift.
Transitioning to and maintaining an exit mindset shifts your priorities, focus and goals. With an exit mindset, any strategic decision you make in the business will be driven by a desire to show growth and add value for the buyer, and maximize the liquidity and financial freedom for your reinvention after the exit.
This mindset shift is taking all the strengths, assets, experience and opportunities for your business and applying them to one specific outcome – your exit on your terms on your timeline. They include all your:
Drive Motivation Belief — spiritual
Passion Determination Conviction – emotional
Inspiration Resiliency Clarity
That’s a big shift. It’s a shift that most business owners do not and cannot make. They get stopped right here in their mindset along with their naïve exit criteria.
With your specific criteria in mind, the right exit goals are better than SMART Goals. The right exit goals for you and your business are:
Every goal must be quantifiable. If you can’t measure it, it can’t be a goal.
To maximize the value of the business to make it more appealing for buyers, you want to show numbers, forecasts and momentum. To help your sales team achieve new heights at the same time as you are taking a less active operational role, you can break down each goal into increments of the larger goal. Focus on achieving 10% of the new bigger goals. Then achieve it 10 times over. It’s easy to repeat what you’ve already done. The accumulation of these smaller goals will build momentum and confidence to surpass the original goal because all action is aligned with achieving the smaller goal.
Use relevant numbers. In e-commerce for example, which will drive revenues more: your search engine rank or the click-throughs to the sales page? The answer depends on your business. Focus on what is relevant to your business. Relevance also ensures the exit goal is tied to your purpose and values from your criteria above. Be sure the Key Performance Indicators (KPI) you use are meaningful to potential buyers, not just you.
This is the checks and balances piece. Make sure each of your exit goals enhances all the factors that will make your business/organization a viable option for buyers. If you have a goal of monetizing the revenue potential in a new target market as part of your exit price, but you can’t prove it will generate sales, that’s a rathole. Test each goal to be rathole-resistent before you commit to achieve it. It will make your exit smoother and your negotiations stronger.
When you validate that you have the right exit goals to get out on your terms and on your timeline, and each of those goals meets your goal setting criteria, you become unstoppable. Skip this step and you risk everything you have been working for. That loss is totally preventable.
Once you know what you need to aim for, you can set better goals to get to your freedom number. (See yesterday’s post) There are two parts to any goal setting.
1. The biggest secret to goal achievement is to be sure you pursue the right goals. Therefore, start by assessing your criteria for each exit goal to validate that you are working towards the right goals.
2. Then think through your goal setting criteria to ensure success.
Before you take any action, before you even set your great goals for your exit from the business and beyond; there are four criteria you must establish to put each goal on a sound footing.
1. Be Invaluable
To be invaluable to your business and to your clients, you must always deliver your best. You must always be working on those tasks that make you most valuable to the organization and your clients. So before you launch into an ambitious project or campaign, get clear on what makes you invaluable, what’s important and maximizes your worth.
When you apply this criteria to your exit goals, it means that no one else can ensure your exit on your terms. You can’t delegate your strategic role in selling the business to anyone inside the company or to your advisors. You are central to the success of that transaction and to ensuring your ideal life beyond the business.
2. Your Purpose Must Be Bigger
Your purpose for your chosen exit option must be greater than just the ‘cash-out’ number it brings in. Your purpose could be as transparent as to ensure your family’s future, to pay for college, to pay off the mortgage, or walk away with the financial freedom for a secure retirement. Your purpose could be to fund a non-profit, or build a school around what you love. Your purpose could be to eliminate cancer or wipe out malaria from your research. Your purpose must be more important to you than the money. It should be so big, it pulls you forward, with no regrets about the business you are leaving.
3. Your WHY
Why is it important to you to work so hard this year, now, towards your exit? Because you are supposed to? Because you need to? Because people count on you? When your WHY is really really BIG, it WILL pull you forward; it will compel you. You can’t help but work harder and get more done; you will be more strategic in your decision-making to maximize the value of the business, making the business more buyer ready. Even if you think your WHY is the money – say you really want to walk away with $5M cash – go deeper. Dig for the emotion that drives you. Dig for the need that will fulfill. Without that deeper personal WHY you want this exit, it’s easy to waiver and get distracted by day-to-day operational issues.
4. Be Passionate
The more passionate you are about what you will do and how you will help more people:
a. it will be easier to let go of the business with something more exciting/ enriching/ rewarding to move on to;
b. your timeline will be clear and laid out; c. buyers will know you are committed to this close, that the deal will go through.
In your exit, it’s not all about the financial transaction. To let go and move on, you must also be passionate about your reinvention, what you are moving toward, looking forward to doing/having/experiencing. Be clear on what makes you so passionate about your reinvention before you get to the exit transaction.
Only after you know these four goal setting criteria, only then can you proceed to your exit plan and take responsibility for what you will do and where you are going. At this point, you can effortlessly lay out a roadmap to achieve the exit goals that pull you to achieve that long-term wealth.