Prior to the crisis, there were owners planning to exit their business. There will be owners who plan their exit after the crisis, and owners who are now wondering when and if they will ever be able to leave. The following are accounts of three owners whose businesses have been impacted negatively by CV-19.
Jim has been planning for the last three years to sell his business in five years to a third party and move south. He knows how much money he will need for life after the business and what his financial gap is. His financial gap has grown significantly in the last month as his business would be valued by a buyer for much less if he’s able to sell. Now he’s not sure when his goals of fishing and golfing in Florida will be realized.
Susan, who has been in business for 20 years, has been thinking she’d initiate her plan for leaving next year when she reaches age 60. To this point, she’s done nothing to assess personal or business readiness for exit and has no real objective idea as to what her business is worth. Susan also really doesn’t know what exit route would be best as she has key employees who have expressed interest in eventual ownership, but she’s also thought about selling to a third party.
Until now, exiting her business wasn’t at all on Sarah’s mind. She’s well past the 5-year hurdle with ten years in business and is highly prosperous and profitable. Prior to launch Sarah had a successful corporate career that she finds herself missing more and more each day. It’s a lot different going to sleep each night owning the risk of a business, and with this crisis, she’s not sure how much longer she’s willing to do that. Thoughts of exiting are new to Sarah but frequent.
Each of these business owners has “exit on their mind” while working around the clock to manage and lead through a crisis with a goal of lasting. Following are a few baseline exit planning steps Jim, Susan, and Sarah can take now, in the midst of the chaos. And, at least one of these actions is needed for planning to make it through the crisis.
Project cash flow for the next 12 months. Strong cash flow is a key ingredient for planning a successful exit. You can access spreadsheets for free at https://ennislp.com/corona-virus-resources. Effective cash flow management will also be critical for making it through to the other side of CV-19.
Request an updated Financial Needs Analysis from your Financial Advisor calculating how much money you will need post-exit and whether or not you have a financial gap.
You will need an objective Estimate of Business Value for the Financial Needs Analysis to be meaningful. We could help with that if needed.
You may find that the results of your analysis demands a change in your departure date, your goals, and/or your planned exit route.
Review your plan for the unexpected events of death or disability or Business Continuity. These times are difficult for you as an owner but would be even more challenging for those left behind if you were suddenly unavailable to work in the business.
Begin to assess personal and business readiness for your exit. Invest 15 minutes and complete this free exit readiness questionnaire which will score you in areas of Finance, Operations, Planning, and Revenue/Profit. You will NOT be asked to submit any confidential financial information.
Please contact us if we can be of help in any of these steps. You can also access online resources at https://exitreadiness.com
