Posts tagged with: exit objectives
Ideally, exit planning occurs before action in every area.
Too often business owners/CEOs assume that because they want to exit the business soon, that they just have to act to make it happen. In fact, they are often surprised by how extensive the planning is that they must work through before they can get out and transition to reinvention.
Exit planning must include each parameter on this list.
Exit Objectives – Before you proceed, you must identify your exit objectives for the business and for your life beyond the exit.
Value Drivers – You must identify your value drivers, the value drivers that will make the business buyer attractive and the value drivers that secure the future growth of the business and protect your employees.
Transfer Control/Ownership/Management – Control, ownership and management are not the same thing. So planning how to transfer these different skill sets to successors is essential. You need to break them into distinct skill sets before you decide who you will train to succeed you in each area.
Contingency Planning – When things are running smoothly, owners think contingency planning is irrelevant. But if illness or an accident incapacitates you, your valuation will plummet unless you have a contingency plan/continuity plan established, documented and ready to activate.
Wealth Management/Preservation – You have to decide how much of the illiquid wealth of your business you want to leave in the business, to maximize valuation and secure future company success vs. how much do you need to liquidate to achieve your exit criteria and the financial freedom to pursue your reinvention.
Successful Exit – Defining and planning what a successful exit means to you is important. There is no vanilla answer. It’s unique to you, your family, your goals, your business, the lifestyle of your dreams. If you can’t describe it, you will never know when the package on the table meets your needs.
Exit Options – The earlier you start exit planning, the more options you have, the wider range of exit vehicles, wealth vehicles and reinvention options you can have.
When your intention is raised to the level of a commitment to accelerate growth, maximize value in the business and make that business buyer ready; at that point, every task, goal and objectives must be tied to those clear specific objectives. It’s essential to make those objectives your priorities to make your business buyer attractive.
To Stay Focused On Your Priorities
Here are 5 simple ways to stay focused but they only work when you make these rules into habits you live by every day.
- Always tie your daily task list to your goals. If your daily tasks are not helping you develop your exit plan and bringing you closer to your transition, they are keeping you from it
- Be sure the first task you tackle each day moves you closer to achieving your biggest goals. Your biggest goals should be what helps you get out when you want to.
- Delegate what does not have to be done by you.
- Focus on what’s important to eliminate crises. Crises take you off your game to address another need on the critical path or on someone else’s priority list.
- Set time limits for every task on your list:
- to ensure you complete every task on your list
- to stay highly productive using your time wisely on every task you take on
There’s a very compatible synergy between priorities and productivity. Cultivate this kind of co-dependence and you’ll get more done.
Whether you address it from the outset of your business or later down the road, every business owner needs an exit plan. Some business owners intend to sell the business for maximum profit, some want to sell it to successors or employees, others want to go public, and still others intend to keep it in the family.
In each case, taking the time to prepare the exit plan now will allow you, the owner to reach your ultimate goal with a comprehensive 360 view with all the pieces in place. Business-owner exit planning should begin five to 10 years before you want to retire or pass your business to your chosen successors.
Unfortunately, 95% of all business owners NEVER do exit planning. And they wonder why they end up with nothing when, on the day they get fed up and want to sell it as fast as they can; they accept the first offer they receive – at a discount of 30-50%.
That doesn’t have to be you.
Plenty of expert advisors will tell you that exit planning starts with your exit objectives and the retirement income you want to have – because that’s where they start working with clients.
There are a few other pieces you need to define BEFORE you can answer those two questions. They are core pieces of having a strong business foundation long before you consider implementing any exit strategy.
Before you can define your exit objectives, you must identify:
1. Your long-term ultimate goals for the business – with you or without you
2. How you want to secure your legacy now, before you leave
3. How you want to ensure your dynasty once you exit the business
4. Who you want to take leadership of your business (as owner, non-owner manager, or transition staff)
What still needs to be done in terms of business planning, contingency planning, and succession planning to position the business for maximum growth and value? Work on that planning first, as a prerequisite to detailed exit planning.
You may have multiple exit objectives. Be sure they are consistent. Then prioritize the outcomes. Selling fast, selling for maximum value and selling for 100% cash up front can be conflicting goals.
As part of your transition planning process, when you define what your next step will be after you exit, you’ll get a better idea of how much funding you need: for a new venture, to invest or for philanthropy; not just your personal retirement income. You’ll also get clear on your goal timeline and your options for what format the transaction can take.
The lifestyle you intend to pursue after the exit may expand or restrict the exit options you consider.
‘You don’t have to have a plan today.
You do have to start planning today.”
The more lead time you invest in building a strong business to achieve your ultimate goals, the more fruitful and fulfilling will be the exit strategy you can choose to implement.