Posts tagged with: exit plan

Leaders Exit Decisively

exit signs

Leaders exit decisively.   They know when to leave a situation or relationship or role or job.   Exiting can be painful, unexpected, frustrating and dramatic.   Exiting can also be exciting and challenging. Exiting can be both good and bad. There are ex-jobs, ex-companies, ex-spouses, expats, ex-presidents, ex-players and more.  Leaders actively look for the next door to walk through by exiting the previous one.   A great leader consciously exits and has an exit plan. A good leader doesn’t slam the door shut completely but leaves a connection to the past in place. The connection could be in lessons learned or in relationships.   Leaders are active and decisive in exiting one door and entering another. What do you need to exit and what’s your exit plan?

Star Dargin
www.starleadershipllc.com

Your Real PayDay

PayDay

Most entrepreneurs know they can make a good income running their business day-to-day, but SOME OWNERS INSTINCTIVELY know that their real payday will come only when they exit the business, most likely by selling the business.

That’s when they can access
multiple millions of dollars from their business.

  1. Is this something you have thought about?
  2. Do you want your business to produce a multi-million dollar windfall?
  3. Do you think it’s possible for your business to fund a multi-million dollar reinvention for you?
  4. Do you know how much your business is worth right now?

95% of all business owners do not have an exit plan – because most owners don’t know what their business is worth. As a result, most owners are walking away with only 50-70% of what their business is worth.

Sadly, most owners and entrepreneurs fail to achieve their dream and get out the way they want to just because of a lack of planning, and forethought. It’s totally preventable.

Those CEOs who invest the time, effort and expertise to plan their exit and make their business appealing to buyers are among the 5% who achieve their dream and the lifestyle it offers.

To discuss how you can be among the 5%, call or email me. Let’s explore strategies to identify what will work best for you.

If you cannot execute a plan now to achieve these objectives, you can’t afford to wait. Call today.

A Way to Help You More Directly with Your Exit Plan

how can we help?

If you’re company is large enough, if you’re open minded enough, if you’re committed to maximizing the value in the business to produce more wealth for you, and if you’re excited about the possibility of making the shift to doing more, solving more, winning more, and succeeding more; there are a number of ways I can be more directly involved in guaranteeing your future dreams come true.

There are many ways I work with clients:

  • Personal Advisory Relationships – Mentoring, Not Coaching
  • Customized Business Relationships To Fit Your Strategic/Exit Needs
  • 1 Day Fee-Based
  • 12 Month Fee-Based
  • Long Term relationship to see you through the transaction and transition to reinvention

I bring the most value to your business and your ultimate wealth, when we build a long-term relationship. It won’t be worthwhile if I’m bamboozling you, or I drop the ball or you hate my guts. I would have nothing to gain there and everything to lose. I am more long-term oriented rather than a rush at the end.

When you wait until the last 6 months before you want to get out to start thinking about how to get your money out of the business, or to figure out what it’s worth, or more importantly how much money you need out of the business to move on to your next venture, travel, avocation or hobby, here are the trade-offs you signup for:

  1. You have fewer choices
  2. Your valuation will be lower
  3. You have less time/options to make the business buyer attractive
  4. You leave 30-50% of the value of the business on the table
  5. The buyer holds all the cards
  6. It’s much harder to complete a transaction that produces your financial freedom
  7. You and the business take a bigger tax hit
  8. The business may not survive the transaction
  9. The buyer will limit the cash you get out up front
  10. The buyer will require your participation, expertise for an extended period of time
  11. You risk walking away with not enough to fund your reinvention dream
  12. Your reinvention plan has not been tested and you don’t have the next 180 days booked solid.
  13. Your wealth advisor is ill-prepared to maximize your wealth to ensure your financial future.

So your challenge is to grow the business, add value to the business and make the business buyer ready before you implement your contingency plan, succession plan, or transition plan.

 “The difference between greatness and mediocrity, mediocrity and millions, spectacular and pathetic performance is how well you use your time, your opportunities, your efforts, your resources and your assets.”

Jay Abraham

WHAT YOUR BIRTH CERTIFICATE SAYS ABOUT YOUR EXIT PLAN


In our experience, your age has a big effect on your attitude towards your business and how you feel about one day getting out. Here’s what we have found:

Business owners between 25 and 46 years old

Twenty- and thirty-something business owners grew up in an age where job security did not exist. They watched as their parents got downsized or packaged off into early retirement, and that caused a somewhat jaded attitude towards the role of a business in society. Business owners in their 20’s and 30’s generally see their companies as means to an end and most expect to sell in the next five to ten years. Similar to their employed classmates who have a new job every three to five years; business owners in this age group often expect to start a few companies in their lifetime.

Business owners between 47 and 65 years old

Baby Boomers came of age in a time where the social contract between company and employee was sacrosanct. An employee agreed to be loyal to the company, and in return, the company agreed to provide a decent living and a pension for a few golden years.

Many of the business owners we speak with in this generation think of their company as more than a profit center. They see their business as part of a community and, by extension, themselves as a community leader. To many boomers, the idea of selling their company feels like selling out their employees and their community, which is why so many CEO’s in their fifties and sixties are torn. They know they need to sell to fund their retirement, but they agonize over where that will leave their loyal employees.

Business owners who are 65+

Older business owners grew up in a time when hobbies were impractical or discouraged. You went to work while your wife tended to the kids (today, more than half of businesses are started by women, but those were different times), you ate dinner, you watched the news and you went to bed.

With few hobbies and nothing other than work to define them, business owners in their late sixties, seventies and eighties feel lost without their business, which is why so many refuse to sell or experience depression after they do.

Of course, there will always be exceptions to general rules of thumb but we have found that – more than your industry, nationality, marital status or educational background – your birth certificate defines your exit plan.

What Your Birth Certificate Says About Your Exit Plan

In our experience, your age has a big effect on your attitude towards your business and how you feel about one day getting out. Here’s what we have found:

Business owners between 25 and 46 years old

Twenty- and thirty-something business owners grew up in an age where job security did not exist. They watched as their parents got downsized or packaged off into early retirement, and that caused a somewhat jaded attitude towards the role of a business in society. Business owners in their 20’s and 30’s generally see their companies as means to an end and most expect to sell in the next five to ten years. Similar to their employed classmates who have a new job every three to five years; business owners in this age group often expect to start a few companies in their lifetime.

Business owners between 47 and 65 years old

Baby Boomers came of age in a time where the social contract between company and employee was sacrosanct. An employee agreed to be loyal to the company, and in return, the company agreed to provide a decent living and a pension for a few golden years.

Many of the business owners we speak with in this generation think of their company as more than a profit center. They see their business as part of a community and, by extension, themselves as a community leader. To many boomers, the idea of selling their company feels like selling out their employees and their community, which is why so many CEO’s in their fifties and sixties are torn. They know they need to sell to fund their retirement, but they agonize over where that will leave their loyal employees.

Business owners who are 65+

Older business owners grew up in a time when hobbies were impractical or discouraged. You went to work while your wife tended to the kids (today, more than half of businesses are started by women, but those were different times), you ate dinner, you watched the news and you went to bed.

With few hobbies and nothing other than work to define them, business owners in their late sixties, seventies and eighties feel lost without their business, which is why so many refuse to sell or experience depression after they do.

Of course, there will always be exceptions to general rules of thumb but we have found that – more than your industry, nationality, marital status or educational background – your birth certificate defines your exit plan.

Family Business Succession Planning

Succession planning is a combination of contingency planning, management planning, hiring, transitioning out of an operational role, taking on a more strategic role, and looking ahead to your reinvention beyond the business.

In family businesses, succession planning may include determining ownership and management succession on independent parallel tracks.

Your exit plan should include the time and effort to implement succession planning to ensure the company survives your departure. Your exit plan will likely be a critical part of your own financial and estate plans.

Five Issues Of Family Business Succession

A succession plan is an exit plan. Your succession planning process should begin as early as possible just like any other exit plan: ideally, when you buy or start the business.

The best business sale outcomes are never a fluke. That’s even more true when your exit plan entails succession planning within the family. Five issues underscore effective family business succession. These issues apply to any size business regardless of industry:

Family business succession can be a painless process.

Family business succession can be a complex process. The combination of personal and business interests, emotional and financial, are leading causes of conflict in family businesses and as a result, many families never address or resolve these issues ever.

Here are some issues to be aware of when considering your own family business succession:

1. Are your children or other members of your family the right people to take over the business? When it comes to family, it can very helpful to have a pre-defined rubric of objective criteria as well as engaging independent external experts to facilitate this process. Ask yourself the following questions as objectively as you can:

  • Do any of your children have the necessary skills, education and experience to take over running the business? If not, are they willing and capable of learning these skills? Outside training as well as mentoring may be required. Do they share your goals, values and aspirations for the business? Do not assume or minimize these cultural issues within the family or within the business.
  • Do any of your children actually want to take over the business? They may have very different ideas or even different ideas for the business. Open and honest discussions about these issues with family members can be extremely difficult and awkward for all concerned.

2. Communicate openly and honestly about your hopes and dreams for the business going forward. Ensure that you are not imposing your own goals and aspirations onto your children. And, when you do transition ownership/ management/ control to the business to family members, do so in a way that is fair and transparent. Otherwise, you risk alienating family members who do not participate.”

3. Ensure that you have the appropriate business agreements in place, which are fair and contracted on commercial terms. One of your children may express a desire to take over the business while another wants to pursue their own professional goals.

Later, jealousies or rivalries may arise if the business does well and the child who didn’t participate in the business feels unjustly treated. A proper agreement in place will protect everyone from any future potential claims that may be made against you and your estate.

Given the current high divorce rate, it may also be wise to consider an agreement to protect against claims made by your children’s spouses against family business assets if their marriages break down.

4. Keep in mind that you do not necessarily need to pass your business on to your children in order to set them up to financially benefit from the business. This is an obvious statement, but one that is easy to overlook when your own identity, self-worth and sense of purpose and value have become fundamentally intertwined in your business. There are many options to ensure that future generations benefit financially that don’t necessarily involve them shouldering the mantel of owning/running your business. This is particularly true if the children are not ready, interested or have the aptitude and commitment to take on running the business. They may have other plans and aspirations.

By passing the business on to your children, you could be putting their entire financial future at risk in that situation. In contrast, if you were to sell the business and set your children up with financial structures funded by the sale proceeds, you would mitigate their risk, and they would have the flexibility to pursue other plans or aspirations.

Think Strategically – Your Vision and Exit Plan Must Agree

When was the last time you revisited your vision for the business. It’s essential to think strategically.

Your vision and exit plan must agree. Strategic planning is a process, not a static step you take and you’re done.

You can apply strategic thinking to every part of your life, your business or any other endeavor. Strategic thinking is the key to achieving every goal you set because it helps you reassess and stay focused on the present opportunities leading to your long-term goal(s).

Wide Angle Lens

You need a wide-angle lens to see the whole picture, to see the big picture, to see the end game for your business.

You have a vision for your business. That’s a fact. Maybe you wrote it down and maybe you did share it with your team when they came onboard. But do you review it with them regularly? Do they know how their work and their efforts help to deliver the desired outcome (financial, customer relations, growth, product development, etc)? This attention to your vision is essential to ensure your efforts are always leading towards your desired exit plan.

A Strategic Approach to Vision

Developing a strong vision statement takes time. It can’t be expressed, refined, tested and reviewed on a 24-hour deadline. You need to test that vision statement in those exact words in the marketplace, with vendors and most importantly with your team.

It would be funny if it were not so damaging to businesses, to survey the executive team of almost any company – and ask them to explain the vision statement from their viewpoint and their tasks and responsibilities to the company. Most of the time, the different department heads, never mind their teams, have a culture of fiefdoms within the business and don’t communicate well outside their own domain. As a result you end up with lots of silos, isolating teams, instead of collaborating more in the best interests of the company.

What Drives Your Vision?

Do you know what drives your vision? Drivers give power to your vision. They are tangible and measurable elements as well as the core values you want embodied in the business, in each member of your team and in the customer experience – think LL Bean.

Only when you are absolutely clear on the vision for your business, can you declare the mission for your business. Without the strategic viewpoint of the vision, there is no foundation to sustain the mission.

Structure and Your Exit Plan

When you implement a structure and build the resources to take on all the key roles in your business (human resources, assets, organizational structure, etc); they must be aligned with your exit plan. You are building a business to be in a position to exit that business on your terms.

You must envision how the business will be managed (by you or others), the support team you need in place (adding tangible value to the business), and the structure and systems that must be in place to make you superfluous to day-to-day operations.

This becomes your goal, to ensure every detail has been assigned to someone else and you can maintain or possibly grow revenues even as you remove yourself from day-to-day activities and decision-making.

A vision and a vision statement are essential to any strong business. But even more important is how you deliver on that vision with an exit plan that lays out how to achieve the vision. However, all this planning is for naught if you don’t act. Implementation is essential. Nothing else substitutes for implementation. Therefore, the vision statement and the exit plan becomes the bookends of implementation. They must agree strategically.

When To Do Strategic Planning?

Strategic Planning

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.

Implementation

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.

Where to Start Before You Set Exit Objectives

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.

Multiple Objectives
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.

© 2009- 2016 This Way Out Group LLC top