Posts tagged with: exit
The foundation for growth and value for your business starts with planning.
“The average business owner spends 80 hours
preparing a business plan and
only 6 hours preparing for their exit”
ROCG 2007 Survey of Business Owners
Read that statistic again:
“The average business owner spends 80 hours preparing a business plan and only 6 hours preparing for their exit”!
That lack of preparation and planning is the reason why owners are ill-prepared to achieve an ideal exit from their business. Instead, they settle for only 50-70% of the value of their business when they sell.
It’s up to you to maximize the value you can receive at exit. It’s up to you, the owner, to demonstrate future value for the buyer, including growth projections to justify the selling price you want to receive on your terms.
You can delay and minimize your efforts and go for a sale that leaves 30-50% of the value of your business on the table or you can plan and strategize over time to prepare you, the business, and your team for the best possible outcome.
Exit planning starts with two exercises, one for you as the CEO, and a parallel exercise for the business. In this exercise you will list your personal core values, your vision and your mission.
Repeat the exercise, with or without your management team, and list your company’s core values, vision and mission.
With values, vision and mission in mind, you can start planning for your exit and what that will mean for the business as well.
By planning ahead, you can be more strategic with each hire, each goal, each decision you make between now and your target exit.
When you have a clear plan for your exit, you will make better decisions, easier, faster, with less risk, fewer mistakes and hit fewer deadends in every area of your business.
With an exit plan integrated into you business plan, corporate goals and strategy will be tied to your end goal, your personal end game.
The first step in exiting on your terms and your timeline is planning. Here are a few areas where you can start planning at absolutely no cost. Planning covers a wide range of issues, decisions and changes. Planning doesn’t have to be expensive. But it takes concentrated time, effort, commitment and follow-through to see results.
Here’s where you can get started now.
When you decide to exit your business, and walk away from the business you built that you’ve owned from inception, you need three pillars to your foundation to make a successful exit.
They are your:
- Skill Set
Here’s a definition of knowledge in the context of the three pillars we are discussing: Mindset, Skill set and Knowledge.
Knowledge of your business is the combination of information you have or acquire, which is applied through the filter of your experience and expertise in your profession or industry.
Information + Experience = Knowledge
Knowledge + Insight = Wisdom
Attitudes/mindset are often ignored in what is needed to learn to achieve your goals. Your attitudes are the most important of all learning components because your attitude/your mindset is the gatekeeper that determines how well you acquire, master and apply any skill set and knowledge.
From all your experience and expertise in your own industry, you have amassed a body of knowledge that likely puts you in the category of a master.
When you integrate your knowledge with the insights gleaned from all your experience and research, you have built up unrivaled wisdom in your specialty.
Now, however, in terms of your Knowledge, do you experience any of the following in your business?
- The whole business is in your head – only in your head.
- Don’t know how to plan, when to plan, when to find time to plan
- No marketing plan, sales plan, financial plan or operating plans – except in your head
- Don’t know how to automate or outsource
- No operating procedures
- No contingency plans
- No exit strategy in place
- Keep all expertise in the owners/ executives heads and private files
If even one of these is true for you – it is a flag of what is holding back your business from all it could be.
Indeed, in the real world, it is hard for your business to serve clients and make a profit, and address all these challenges at the same time. It’s even harder if you are still wearing all the hats in your business, because the ‘day to day doing’ – gets in the way of focusing on and making time for the visionary, strategic leadership tasks that are essential to your long term goals.
In each area where you are not an expert you always have two choices:
- Do what is necessary to acquire the mindset, skill set and knowledge to effectively deal with those obstacles or gaps.
- Hire someone to do the job for you.
When you decide to exit your business, you have the same two choices. You can take the time to become an expert in all facets of how to sell a business (very costly, time consuming and unrealistic) or hire a team of experts to make it happen so you can get out
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.
“The Strongest Businesses Around The World
Reach For Big Goals And Achieve Them“
Would You Like That For Your Business?
Would You Like To Achieve Every Goal You Set?
You know that goal setting and goal achievement are two different things. Everyone can get to the starting line and set goals for their business if they choose to.
But the latest statistics prove that 95% of all businesses NEVER achieve their goals, business owners never get to exit and are leaving 30-50% of the value of their business on the table. You see only 5% of all business owners ever follow-through to get to the finish line of an exit transaction so they can transition to their reinvention.
I’m not alone in broadcasting these shocking results. According to Jay Abraham there are three reasons for that very low success rate:
- Entrepreneurs don’t start by having any goals, never mind an exit plan. They only have hopes and dreams.
- They never take action.
- They don’t have a step by step plan to achieve their goals, get out, and move on.
95% of all businesses are stuck at a point where the owner takes home enough to pay the bills – $35-40K. They are so busy in the business just meeting their expenses and covering payroll; that they never take time to look at what it would take to make their business into a multi-million dollar enterprise.
For some businesses, it could be as simple as finding ways to increase volume or to increase prices. But for other businesses, it may mean exploring how to leverage strengths, exploring how to expand into new markets or even pursuing new revenue streams or new business models.
Reports at the Exit Planning Exchange Summit 2010 substantiated this lack o f planning saying:
75% of the businesses who seek out exit industry experts (attorneys, brokers, M&A, investment bankers, wealth advisors):
- have no plan and
- don’t know what to do with the business when they do want to exit.
Settling for where you are because you don’t know how to take the next step, or you don’t have time to research your options, or you don’t have the cash flow to hire the team to achieve your dreams and goals – these are all excuses we feed ourselves.
Ask for help. Make a plan. Take one step closer to your exit goals.
Most CEOs go into business because they are very good at something and/or they love it very much. They put heart and soul and an overabundance of sweat equity into the business they are passionate about. Over time, the business can and often does consume them, their life, and their identity. They become one with the business.
This emersion in the business is essential for the business to survive and become a thriving enterprise. So to an extent, it’s very very good. Up to a point.
This commitment is essential to building the business, establishing the culture, building out the team to run with and establishing a clear value for the business. But this oneness with the business can cause damage as you start to consider when and how to get out of the business.
CEOs put on blinders that can actually set them up to sabotage or murder their business. In fact, over 95% of all business owners still do this. One of the biggest blind spots for CEOs is how emotionally attached they are to the business which can make it very difficult to exit or sell the business.
You are emotionally stuck in the business when:
- You can’t let go enough to take a vacation never mind ‘retire’
- You have no identity, social life, purpose outside of the business
- You can’t delegate day to day operations because no one can run the business the way you do
These are just a few of the red flags that you might be emotionally stuck in your business, not prepared to move on, never mind exit the business. First recognize how you are emotionally attached to the business, then identify why. Only then will you be ready to make the changes to reposition your role so you can get out of your business. It takes conscientious, diligent hard work to make the transition to actually get out of your business.
The easiest way to start is with a plan for what’s next. Brainstorm on ideas/possibilities/opportunities of what’s next for you when you do exit the business. Do they include a new venture? an adventure (solo or with family)? an avocation, service or hobby? Then explore what has to change in the business to free you up so you can get out of your business and pursue/fulfill these latent possibilities and opportunities.
To get out of your business, you need to get emotionally unstuck from the business and emotionally charged up about your next reinvention.
Your success mindset in the business uses your experience and knowledge from the past combined with your refined skill set growing the business today to get results today.
Your success mindset for growing the business, growing the team, adding capacity and building a stronger business foundation probably has nothing to do with when and how you’ll exit the business.
More than likely you never built an exit plan into your business plan at the outset. Today, entrenched in your success and growth mindset, you don’t have time to focus on the future coming closer every day.
In order to let go of the business, get out and pursue your reinvention, you need to cultivate an exit mindset. It’s not the demise of the business; it’s a new beginning for you in a new direction and a new beginning for the business under new management.
It’s easy to let this slip. We’re all more comfortable with old habits than building new ones. It’s easier to ship standing orders and keep marketing costs down because the market is still soft.
But those habits conflict with your exit objectives. That conflict first takes hold in your thoughts. When you struggle with cultivating an exit mindset to shift your priorities away from day to day operations and start applying effort and time to the strategic side of the business to prepare it for a new owner – that’s when it’s easy to sabotage the whole exit plan. That’s when you see owners who tell their advisors to get things lined up and seek out potential buyers but can’t let go enough to sign the papers.
The exit mindset is a process to work through to ensure you are rewarded for the value you’ve built up in the business and to prepare you for what’s next on your terms and on your timeline.
A Fundraising Campaign to publish Exit Essentials – How to Get Out on exit planning for entrepreneurs who want to sell, scale or pass on their business to a successor in the next 3-5 years.
I am launching a campaign to raise funds on Indiegogo.com, to publish my second book: Exit Essentials – How To Get Out. Exit Essentials is about exit planning for entrepreneurs like you. Exit Essentials educates and prepares business owners to be able to monetize their business when they plan to get out, instead of simply shuttering the business and walking away. Exit Essentials reveals the secrets the transaction experts want entrepreneurs to know before selling a business, but no one tells them.
In Exit Essentials, I introduce the 95% of all entrepreneurs and business owners who do not have an exit plan for their business; to the decisions, options and opportunities they need to know about years before they decide to get out of their business.
“[Exiting small business] owners are preparing for the deal of a lifetime with possibly zero experience.” – (MorganStanley SmithBarney publication, 2011) [via Blackbridge Newsletter 2011]
They think they’ll be able to sell when they want for what they want with no lead-time or preparation of the business, the team or the business owner. That’s a diet of hope and promises that will satisfy no one.
“Because of a lack of pre-planning, most business owners are leaving up to 50% of the value of their business on the table when they exit. This situation is totally preventable.“
Exit Essentials should be required reading for all business owners in order to take control and achieve their goals in the business and beyond.
Every donation at http://indiegogo.com/exit-essentials is important to get this book published and distributed. To thank donors in tangible, measurable ways, I’m offering some big perks. In addition, supporters of this fundraiser will be able to get the book Exit Essentials and other rewards first.
I need your support to get Exit Essentials published fast, so owners like you will be prepared for the coming sellers’ market. Thank you very much.
Your business exit is not a death sentence. It should be the ticket to your next venture, adventure, avocation or simply the joy and fun of retirement. Here are just five reasons why you need an exit strategy.
- Plan B – Every business owner needs a Plan B. You always have options and contingencies in mind for business decisions and opportunities to consider. When it comes to what you do ‘next’ after this business, you need options too. Plan B could be as simple as closing up shop and walking away when you get tired of the business. Plan B could be what you’ll do next when your hands, your eyes or your legs won’t let you do any more of what you’ve been doing for the last 20 or 30 years. Plan B could be the fulfillment of every promise you made and every dream you’ve had over the last few decades. If you don’t have Plan B, you are in denial.
- Plan Ahead – Every CEO is busy in their business, keeping it going, growing, and thriving. CEOs care about their customers, clients, staff as well as their outside support team, investors and others. But when you stay focused on today, tactics, and to-do’s, then your view of the world is narrow and shortsighted. As the CEO, it’s your job, nobody else’s, to look at the long-term goals and direction of the company, the future of the company and the security of your team. The CEO has the strategic responsibility to plan ahead. Own it and everyone will benefit. Ignore it or deny it, and your business will drift with no rudder. When you acknowledge your mortality and plan ahead for your exit, you ensure both your legacy and your dynasty will carry on.
- Contingencies – There are business contingencies and there are owner/leader contingencies. As the CEO, you need both in place. Emergencies happen. We have no control over the weather, fire, flood, or earthquake. How will your business continue in spite of/around outside disasters? You need contingencies built in for the short-term or long-term loss of a key team member – do you and your staff know what to do in case someone breaks a leg or quits for health reasons? You need to document a process and a plan for how to proceed so the business doesn’t miss a step. Most importantly, do you have contingencies in place so that if you must get out of the business, the business can continue? Have you made you irrelevant to day-to-day operations? These contingency plans reduce risk and add value to the business. They provide the terms and parameters for how you can indeed exit the business while preserving your legacy and dynasty.
- Security – Your business is likely our most valuable asset – and yet it’s also probably the most illiquid asset you own. Therefore, while you are working, drawing a paycheck from the business, it is providing security. But as soon as you can’t or choose not to continue in the role of CEO, what does that do to your financial security, especially long-term. You need to start building your exit strategy now so this business you’ve invested so much blood, sweat and tears into will indeed provide for the security of financial independence which you need when you exit. Setting up and implementing this one element can take years.
- Build Wealth – The biggest mistakes almost all CEOs make in both large and very small businesses, is that they settle into building a business that provides only an income stream. They never set up the business to be a wealth-producing machine. They get to the point where they want to exit and there’s nothing there that can be monetized anywhere near the value they think it’s worth. Their wealth is so tied into the business; they can’t leave with the financial independence they dreamed of. There is a solution.
With an exit strategy in mind all along the way, then every day-to-day decision is tied to the strategic long-term goal of a specific exit strategy. When you focus on a wealth-producing strategy, the income stream will be there.
Join us for this half-day seminar on May 15 in Framingham.