Posts tagged with: exit your business

Set Your Exit Strategy From the Beginning Part 2

Here are five more tips on goals to explore to be sure you achieve your ultimate goals when you exit your business.

Align Your Goals With Your Exit Strategy

Do you have goals now? Do you have:

  • Daily goals
  • Weekly goals
  • Monthly goals
  • Quarterly goals
  • Annual goals
  • 3 year goals
  • Exit goals

You need all of them if you want to achieve your exit goals. They must be aligned and integrated.

Here’s a secret no one talks about but they DO want you to know:

Consistency among all these goals is essential or

  • you will fail to exit
  • you will drastically reduce the value, AND
  • you will pay a premium for the service providers in the exit market.

And yet, all of this is 100% avoidable!

The answer is to not just set goals but to stay focused to achieve your goals.

Plan Ahead

You must know your exit date (or at least the criteria for it) and set it at least 2-3 years out – to have time to systematize, streamline and leverage your business to get the maximum valuation.

To get the results you want:

  • Your exit strategy must be part of your initial business plan
  • Your exit strategy must be part of your annual plans every year
  • Your exit strategy must be built into your 3 year goals from the outset

Identify Goals To Increase Value

What can you do to maximize the value in your business? To achieve your goal, you must:

  • Sell more
  • Increase prices
  • Reach new markets
  • Reduce costs
  • Hire/Train
  • Document your expertise

Is The Value Right Now In You Or Your Business?

Be honest, is the value of your business now in you or in the business? This is an uncomfortable wakeup call for most entrepreneurs. Are the expertise and the business strategy all in your head, and in your proprietary files? You have nothing to sell and you have no exit options if this is still true.

Instead, you can and should start to train others on different pieces, outsource different pieces, or start delegating more and more. The side benefit of delegating, outsourcing and automating is that you free up time to work on your most valuable activities including your exit strategy to achieve your goal.

“Business owners do not plan to fail. But 95% fail to plan. Don’t be one of them.” 

Integrate your exit strategy in every plan, every goal from the outset to ensure the value of the business is in the business.

 

Inkling to Exit Your Business? Part 2

RBS Citizens and Forbes Insights recently produced a new survey entitled Middle Market M&A Outlook 2012http://images.forbes.com/forbesinsights/StudyPDFs/RBSC_MiddleMarket_M&A2012.pdf . They surveyed the buyer market for M&A (Mergers & Acquisitions) activity.

If you are the CEO of a growing business with even an inkling to exit your business in the near future, take note of these findings. Their insights and commentary are equally useful to exiting CEOs as prospective sellers into this market.

Here are more of their findings:

There will be deals. One in three executives said they were likely or very likely to acquire one or more significant assets over the course of the next year.

Most express a merely opportunistic approach. About one in four executives described their current orientation toward transaction markets as proactive. Their companies are poring over balance sheets and income statements, looking for viable external targets or even potential internal divestitures. Well over half said [that] though not actively seeking a transaction, [they] would be willing to act should a compelling proposition arise.

Synergy, though challenging to achieve, still drives valuations. Synergy, the idea that one plus one can equal an amount greater than two, can be triggered, within a deal premise. Synergies come in two basic forms: cost and revenue. While both can be difficult to achieve, and both are often overestimated; it is revenues that sophisticated acquirers say should be treated with particular skepticism. Two out of three executives said that synergies were a vital component of valuation.

Executives perceive a range of integration challenges. One reason that executives tend to prefer organic growth is that bringing an acquisition online requires considerable focus and resources. Survey participants noted that a number of areas are, at best, difficult to integrate. The areas of greatest concern include IT, sales and marketing, product development, and manufacturing.

Deal practitioners are using a wide range of tools. In performing valuations, executives use multiple lenses. Tools include everything from discounted cash flow models to comparisons of comparable transactions, public company valuations, payback periods, and even real option and multi-variable simulations.

Consultants matter. Faced with the challenges of assessing opportunities, performing valuation, or financing a deal, executives recognized the need for a mix of both in-house and external resources. For those companies most active in the market; valuation, financing, and due diligence are the areas where specialists are most often tapped.

We’re not for sale. Three out of five executives bluntly stated their companies were not for sale. Still, the remaining two out of five said they were willing to entertain the idea of being acquired. Only a tiny fraction of survey participants described themselves as anxious. And a note to any would-be sellers: the vast majority of executives viewed carve-out financial statements as at least somewhat or very important. Or put another way, the preparation of reliable carve-out statements can help to ensure a quicker transaction.

Reread these key findings in the context of your business and you being the seller who is being targeted. How can you use these insights to strengthen your own company’s position?

Inkling to Exit Your Business? Part 1

RBS Citizens and Forbes Insights recently produced a new survey entitled Middle Market M&A Outlook 2012. http://images.forbes.com/forbesinsights/StudyPDFs/RBSC_MiddleMarket_M&A2012.pdf . They surveyed the buyer market for M&A (Mergers & Acquisitions) activity.

If you are the CEO of a growing business with even an inkling to exit your business in the near future, take note of these findings.

Their insights and commentary are equally useful to exiting CEOs as prospective sellers into this market.

Combining a survey of 432 senior executives with 11 in-depth interviews from companies that ranged from $5-500M in size (45% under $25m); they found that: “most mid-size companies said they had ample cash, while two-thirds viewed today’s conditions as a “buyer’s market.” To this, add the fact that asset prices are at or near historical lows.”

Consider each of these Key Findings and how they apply to your situation:

Key signals indicate that markets could be ripe for M&A. Two out of three middle market executives view conditions today as a buyer’s market. Meanwhile, two-thirds of the survey respondents also said that balance sheet cash was plentiful—with over a third indicating that they could acquire assets of $2 million or more without incurring debt or injecting equity.

Other signals are mixed. Deal volume is often driven by market participants (aka buyers)’ view of future asset values. Only about a third of executives said they believed prices would be higher one year later. However, among the most active acquirers in the survey sample, that expectation rose to one-half.

For now, organic growth is the preferred path. More of today’s mid-size companies are focusing on achieving growth through wholly internal means than by any of the corporate development approaches involving mergers, acquisitions, partnerships, or other close collaboration with external counter-parties.

But companies are very much open to M&A. M&A is recognized as a source of potentially significant growth. Half of all executives described themselves as active in M&A, with one out of eight describing themselves as very active.

 

CEO Exit Readiness Assessment

How do you know when you or your business are ready for you to transition out of the business?

How do you know when you should get out fast or hold on for the long-haul? What business model will help you maximize the value of the business? Here is a starting point for exploring and considering when and how you might exit/sell your business.

This CEO Exit Readiness Assessment provides a short set of questions to highlight your current thinking, decisions, issues and options to get out of business.

  1. Is your business ready to be sold?
  2. Are you ready to get out, leave the business and move on to your reinvention?
  3. Who will buy your business – and what form will the transaction take: trade, cash, management buyout, private equity, VC, Employee buyout?
  4. What sort of seller will you be?
  5. Do you have the right team in place (staff and management)?
  6. Do you have the right set of expert advisors on your team?
  7. Do you know what it is that you don’t know? How do you know that you don’t know?
  8. Have you already planned your reinvention after you exit your business?

There are more questions to consider. Your answers here give you a baseline to begin developing your exit strategy and plan the steps and timeline to exit or sell your business.

From the outset of your business, start asking these questions as part of your strategic planning at least annually if not quarterly. Keep a log of your evolving answers as the company grows, your role changes and your team matures.

When you tie your long term goals for the business and your role to day-to-day decisions, you will make better decisions, faster, easier, with less complete information while minimizing risk.

To avoid exit planning errors and pitfalls that could potentially derail your exit transaction, email me with any questions you may have.

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