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There is one thing every business owner can rely on - one way or another, you will leave your business! The key is to leave on your terms and in style. The only way to accomplish this is to create an Exit Strategy as soon as possible.
An effective exit strategy begins with the answers to a few key questions.
- How do I want to spend my time after the sale or transfer of the business?
- How much income will I need to support the lifestyle I envision?
- When do I hope to start this new segment of my life?
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Questions. Questions. Questions. |
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These three questions are critical to the exit planning thought process because once you ask them you are on the path out. But you're not done yet. There are a few more questions that need answering.
- Where am I now relative to the wealth and timing requirements established above?
- What steps are needed to create the additional value needed within the timeframe allowed?
These two questions are not so easy to answer and typically require professional guidance. Understanding where you are now will require a value assessment of your company. That assessment should answer even more questions.
- Is my company sale-able?
- If so, at what probable price and terms?
- If not - what needs to be done to make it sale- able?
- Are the price and terms sufficient to meet my wealth requirements?
- What is needed to enhance the value of the company in the time allowed?
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A Closer Look for Answers |
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Let's look at each of these questions more closely: For a company to be sale-able, it must have a sustainable advantage, one that tells a buyer the likelihood of future earnings potential is strong. The business should be properly positioned to attract the buyer-type that will see the greatest potential and, therefore, pay the highest price.
While price is important, the terms by which that price is received is even more important. For example, would you prefer a sales price of $2 million whereby $500,000 is paid in cash and $1,500,000 is paid in monthly installments over 10 years or a one-time cash price of $1,800,000? Should you sell assets or stock? The tax implications could be as much as 50% different.
Suppose your business is sale-able but the current price is insufficient to enable you to meet your retirement goals? There are multiple proven strategies to enhance any company's value. It is purely a function of selecting the right strategy, providing sufficient time and the proper execution. Sometimes it might be a revised pricing strategy or a new product or service line extension. For other situations, it may require eliminating value detractors such as the owner's current influence over the customers, customer - supplier concentration levels, lack of second-tier management, employee turnover, unfavorable lease terms, etc.
The business may have a "positioning" issue whereby it is not presently operating in a way that would be attractive to the buyer-type that would pay the highest price such as a Strategic Buyer. BizMACH has been successful at re-positioning clients to secure a higher price with no appreciable increase in revenue or profit. Remember that value, like beauty, is in the eye of the beholder. Many strategic buyers are less interested in buying a revenue stream and more interested in companies that provide synergistic expansion opportunities such as portals into new markets, cross sales opportunities, etc.
In conclusion, leaving your business in style takes time and planning. In over 90% of the cases it will take two or more years for the new strategies to create the track record buyers need to see. The time to act is now. Enhancing value means greater income and profitability. The investment will come back to you in multiples. More importantly is the peace of mind our clients get from knowing that the process has started and there is a light at the end of the tunnel - not a train!
If your business is keeping you up nights, contact your BizMACH Affiliate today for a free consultation and retire in style!
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Coming In The Next Issue |
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Don't miss the next issue of Exit for Success.
Tips for Inter- Family Business Transfers
Use the link below to read previously published issues.
BizMACH is an association of highly skilled consultants, evaluation experts and merger and acquisition specialists. We take ordinary companies and create extraordinary value. Best of all, we only work with lower mid-market companies.
Competitive advantage is the key to revitalizing your company's growth and profitability. Call us if you'd like a free consultation and to learn how BizMACH can grow your company and increase its value.
When you work with BizMACH, you're using the BEST®.
Business Evaluation and Salability Tool
Tom Long
Solid Oak Consulting, LLC
522 South Elmwood Ave
Oak Park, IL 60304
708-524-0886
telong@solidoakconsulting.com
Tom Long is an Associate Accredited by the
Institute for Independent Business International
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