Innie. Outie. Passer. Squeezer. They sound like football plays. In a way, they are. These are methods for exiting your business – strategies that will empower you to “dance in the end zone.”
With all the options (selling to a key employee or a third-party, passing on to family, or liquidating) is there one “right” way to exit your business? Yes. With a plan.
Determining your exit strategy and taking thoughtful steps towards it enables you to celebrate the culmination of your hard work with a well-deserved (well-funded) victory dance. Fortunately, there is a playbook you can follow.
Your Exit Planning Team
A carefully executed exit strategy enables you to advance towards your goal with confidence and clarity. It starts with assembling the right team.
To continue our football analogy, your quarterback is an exit-planning strategist who helps you navigate the complexity of the process. During the early stages, one of his or her most critical tasks is to assist you in selecting a winning team. Who needs to be there? Whose assistance and support do you need to exit successfully? This is often a trusted CPA, attorney, your spouse and/or family members, business partner(s), and perhaps key employees.
Once you have your team, how do you put them – effectively – into motion?
Exit Best Practices
While your post-exit goals are as unique as your business itself, there are best practices that inform the planning process. These include:
- Involving your team early and throughout the process.
The bottom line is that your exit strategy will not be successful if you do not include all members of your team – and the sooner, the better. For example, say you have been speaking with your strategist for months about exit. Great! But you have not brought your attorney in on the conversation. This is a problem.
Your attorney needs to be involved early, though not necessarily deeply at first. He or she needs to know that you intend to exit in X years and that he or she will be talking with your strategist at some point about processes and documents. Your attorney needs to be prepared so the process is as streamlined as possible.
Not only does communicating with your team from the outset enhance efficiency, it improves effectiveness. What if, for instance, your partner wants to pass the business on to her children, and you do not?
If you don’t have this and other difficult conversations early, they pose a significant threat to your exit. It is best to address this early in the process to alleviate or manage that risk. Your exit strategist can play a critical role in facilitating and moderating these conversations.
- Following the playbook.
What’s the key to a successful exit? As NAVIX CEO Patrick Ungashick says:
“If you stop and think about it, in order to have a happy exit, two things have to be true, and they have to be true at the same point in time. One, the business has to be ready. Two, the owner or the ownership team has to be ready. Getting a business ready and getting an owner as a human being ready, that’s two very different laundry lists of things to do, challenges to face, hurdles to overcome.”
To ensure both you and your business are on the same track, it is helpful to follow the 20 Point Planning Process. It’s your exit playbook, and it prompts you to look at tough questions such as: how will I likely exit, and when? How much do I need to achieve financial freedom? How do I mitigate tax burdens? How do I manage risks? And what in the world am I going to do after?
At the same time, the process has a parallel focus on the business: am I increasing my business’s value? Are my financials up to par? Given the market, what’s the business worth? Is it scalable and ready for sale? Does it have sufficient resources and reputation for its next phase?
Exit planning can be overwhelming. Start with the map. There is a sound process in place, and if you follow it, it will take you where you want to go.
- Relying on your quarterback.
Your exit-planning strategist is an investment in your future. You maximize your ROI by working through the process with his or her input and by leveraging the skills he or she brings to the table.
It is difficult, if not impossible, to work on an exit plan if you are working in and on your business every day. Your exit strategist minimizes day-to-day disruption, frees you to focus on maximizing its value, and enables you to create a sustainable plan.
Some owners think: “But what about my attorney; she’s great. She can do this for me.” Or, “I have a terrific CPA; he can handle this.” The truth is that while they may be involved in certain strategic discussions and implement some tactics and transactions, they typically are not prepared do the all the quarterbacking and heavy lifting of preparing a proper exit plan with you.
Think about it this way: if you have a heart condition, you’re not going to call an orthopedist. You need a heart specialist, surrounded by an expert cardiac team. Likewise, you want to work on your business and plan for a successful exit. By-the-hour CPAs or attorneys simply may not be capable and qualified to help – and you probably couldn’t afford their hourly rates to do the job right anyway.
Sooner or later – and one way or another – every owner will exit his or her business. Whether he or she does that successfully is another story. By giving the exit planning process careful thought and leveraging the input and effort of your qualified and experienced team, your end zone celebration will be the highlight of your career. And a great start to whatever you have planned next.