Planning to Exit? Follow Your Blueprint
Follow Your Blueprint
Following an exit strategy for your business is like following a set of blueprints to build a house. You have thought about, dreamed about, and planned for the desired end product and have carefully crafted the steps you need to follow to realize your dream outcome.
Once the blueprints are in place, you have an overall view of what you are creating and a clear understanding of the details. That cost and timeline to build will let you know if you have the budget to achieve that dream home or if you need to hold off until you have more resources. Or the blueprint plan may tell you that your budget is right on to build the home of your dreams.
Without carefully considered blueprints, you could end up with home in a style you don't like, one that's too big or too small. Regardless, you end up with something you regret because you didn't plan the outcome. This concept also applies to planning to exit your business. That is why every business owner needs an exit strategy, regardless of when they want to sell.
We find that many sellers who think they want to sell and develop their exit strategy and wind up thinking, "I don't really want to sell, after all. I'm not ready." Maybe the owner realizes they love the industry they're in but want to change their position within it. Perhaps, instead of selling, they realize that they will have to grow, make an acquisition, or find a new partner to achieve their desired exit. Bottom line, do not sell a business you love before thinking about the consequences. The blueprint for exiting your business (your Exit Strategy) shouldn't tell you how to sell your business; it should tell you
why your selling
what the elements of the sale should include and what is negotiable
when you hope to sell
what elements of the sale that you won't negotiate
These questions may sound easy, but answering them honestly takes a lot of self-reflection and consideration by the business owner. People automatically think that when you sell your business, you're going to retire, travel, start a new hobby or spend time with family. While that may be true for some, we often see owners who want a new challenge, or they may want to stay with the business with a specific role vs. running the business and shouldering all of the risks. Breaking down an exit strategy into specific areas helps the business leader/owner focus on understanding what the impact a sale will have on important areas of their business and personal life. Interested in learning more? Our free resource, Key Questions When Planning Your Business Exit Strategy, will help you get started on developing your own blueprint.
Defining Your Exit Strategy
When working on an exit strategy, we usually find the most challenging question to answer is, "why are you selling?" What will you do with an extra 60-70 hours a week once you are no longer running your company? The thought of that can be paralyzing—especially for a go-go business owner who has walked into the same building, sat at the same desk, and made nearly every decision for however many years they've owned the business. Before selling, an owner must work on separating the business life and personal life. Are your friends all business acquaintances? Do you have family members who work in the business and will remain on or perhaps lose their job after its sold? Getting to the heart of why you want to sell long before considering offers is critical to a successful sale, transition, and a no-regrets post-sale life.
Understanding and laying out what is negotiable and what you "won't" negotiate on helps match what you hope to get from a sale financially and what a buyer will realistically pay. One of the essential steps in the "what" process is understanding the market value of your business. An up-to-date business valuation by a reputable firm not only provides owners with the present market value of their company; it also acts as a guide for making strategic decisions for the health and growth of the organization. Your baseline valuation can help you fix today what will give you a better outcome tomorrow. Read more about business valuations in this article.
The answers to your "when" questions, coupled with a current market valuation, will help you determine whether you need to wait to sell, grow organically, acquire another company, find new market differentiators, or upgrade systems. Taking these types of actions before you go to market will make a company more salable, attract more buyers, and help you set a realistic timeline to achieve your desired exit—with no regrets.
Having a clear understanding of all of these key elements of a "No Regrets" exit strategy helps the seller know what questions to ask and helps lead them to the right sale at the right time. If you would like to dive deeper and learn from real-life examples of the importance of developing a 'No Regrets" exit, read "No Regrets, How to Grow and Then Exit Your Business, Emotionally and Financially Strong."
Do You Have A Plan A? How About a Plan B?
Getting your Plan A—your Holy Grail of the perfect exit in place right now is important.
With your plan in place, you'll be prepared for the unexpected that may cause you to sell or exit before you planned. Things like an unexpected offer to sell or merge, or health concerns, or a family crisis can cause an owner to sell early. Any number of unplanned life events can cause you to have to exit your business when you least expect it. That's why getting your exit strategy in place today is of utmost importance. We worked with a client who had a very successful business run by him and his partner. Tragically, his partner was diagnosed with a terminal illness, and the owner was faced with selling as he lost his long-time business partner. The silver lining in this story is that he had a plan in place, a strong management team, and drew on support from outside the organization to help through the crisis. The owner didn't have to sell when he wasn’t ready and went on to grow the business.
We discussed the importance of your Plan A, your best-case scenario outcome, and understanding just what you want to achieve with your sale and why. Now let's look at why you also need a Plan B and why Plan B is frequently a more realistic look at what might happen and more likely to occur. Plan B should address "what-ifs." What if you want to sell to a private buyer, but a public buyer approaches you? What does that mean for your business? What if you find a buyer that wants to keep key staff but move the location? How does that affect the team and the customers? There is any number of those variables that will arise during the sale process, and knowing what you want and what you won't negotiate on will provide you a baseline for how much flexibility you have in agreeing to a sale.
You most likely have a business strategy, a growth strategy, and a marketing strategy. Now's the time to create your exit strategy, your blueprint, to achieve a no regrets sale of your business. Whether you're planning to sell in 3 years, 5 years, or 25 years, everyone needs a plan. Working with a professional to help guide you through both the emotional and financial aspects of exit strategy development will help you feel prepared and ready to objectively view offers to find the right buyer when you are ready to sell. Understanding your "why, what, when, and won't" is critical to achieving your "no regrets" dream exit. If you need assistance in developing your exit strategy, regardless of when you plan to sell, reach out to Paradise Capital. We’ve got experienced team members that will bring you through the exit strategy development process to help you plan to achieve your “no regrets” exit.
Paul Niccum is a Business Strategist and author of No Regrets, How to Grow and Then Exit Your Business, Emotionally and Financially Strong! and GrowNOW! Your Fast Path to Growth.
After building six businesses and selling numerous companies to publicly held companies, Paradise Capital CEO Paul Niccum has faced the same fears and emotional concerns that all sellers face. He's both a seller and a buyer—Paul has also acquired eight businesses for his own companies and has been involved in the sale of over 100 companies during his career.