The quite famous advertisement of “Got Milk?” has pictures of celebrities with a milk mustache. This is a great way to get a simple message across to millions of people. Unfortunately there is no simple way to get the message to business owners that they need a written exit strategy and plan. I tell owners that one day they will, without a doubt, exit their business. Then ask – do you want to exit on your own terms? Usually the response is – “ I’m not ready to sell my business.”
You may be right! One of the first steps to creating your exit strategy is to determine your financial and mental readiness to exit your business. This process has a significant impact on the exit strategy that you employ and the options and range of values available. So, what then is the definition of an exit strategy?
An exit strategy as defined by John Leonetti in his book “Exiting Your Business, Protecting Your Wealth”is:
” The written goals for the succession of a business’ ownership and control, derived from a well thought out and properly timed plan that considers all factors, all interested parties, and the personal goals of the owners in a manner and time period that is accommodative to the business, its shareholders and potential buyers. “
Do you notice something missing here? It doesn’t say “sell the business”. Also, what is included is an emphasis on the personal goals of the owners. Taking a holistic approach in your exit strategy focuses on maintaining a life style important to the owners after the exit.
Another interesting element above is the comment on the range of values for the business. Many of you may think – “Isn’t there one value for the business? Just what a buyer is willing to pay?” Well, the answer is that there are indeed a range of values – fair market value, investment value and synergy value – that come into play when you have identified the owners motives and properly planned the exit.
As a partner with B2B CFO LLC, my firm and I have made a major commitment to understanding the exit planning process and helping business owners create a path that meets their goals. If you would like a more detailed and personal consultation, please give me a call.