"I want to sell my business in the next 1-2 years..."

Many baby boomer business owners are thinking they "are ready" to leave their business in next 1-2 years and begin their retirement or third act in life.  With the economy growing and the number of investors seeking quality businesses to buy, many are thinking it could be an opportunity to "sell high" and accomplish their financial goals.

If indeed there is a desire is to sell within 2 years, and minimal or no exit planning and pre-sale due diligence has been achieved to this point, following are a number of the key planning issues that should be addressed in the first 60 days:

• Establish owner-based exit goals (desired buyer, sale-price, values-based goals, etc.) and do whatever possible to prepare for life after the sale. Survey data indicates most business owners are not happy in life two years after the sale of their business.

• Select a transaction intermediary (Investment Banker or Business Broker).

• Get an estimate of business marketability and value.

• Begin tax planning and pre-sale due diligence.

• Assess and, if possible, enhance business value drivers.

• Take steps to protect the value of the business during transfer (i.e., employee incentive plans/stay bonus).

• Select the remaining needed members of your Deal Team (i.e., CPA, M&A Attorney).

• Review your estate plan and business continuity arrangements.

• Make decisions pertaining to a plan for communicating your plans to employees.

This is not an exhaustive list and only represents what should happen in the first 60 days.  There is much more to do throughout the 2-year period to give yourself the best chance at a successful exit.  So, an immediate priority should be the selection of a trained and experienced Exit Planner to assist with the management of the exit planning project.  Typically someone is going to engage a knowledgeable project manager or general contractor to manage the process for building their "dream house".  In selling a business, there is much more at stake than building a dream house.

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

Exit Planning and Your Heart's Desires

The Problem

As a business owner, you pour your heart into your work, and it has become part of you. But at times, the business you have carefully nurtured for years can become a burden - there's a part of you that yearns to do something else - travel, spend more time with family, enjoy more leisure, or even start another new business. You need clarification. 

So, when it comes to considering the future of your business, where is your heart?

Along with sound financial preparation, a primary objective in a healthy exit planning process is helping the owner identify your objectives after you transition the business. Determining your life's course after you leave your business takes careful thought. The process may involve serious family conversations and consultations with trusted advisors. 

Unlike planning your finances, you are planning what will make you fulfilled and happy is far more subjective. Emotions, hopes, dreams, fears, and uncertainty often cloud clear thinking. The resulting lack of clarity can be paralyzing – so we do nothing. But there are some steps you can take right now to be sure you are on the right track.

Take Action

Grab a pen and do the following:

1. Make a list of what you want to do yet have to have time to do. Consider family, travel, hobbies, and volunteering. Be specific. Prioritize them and set some clear goals. 

2. Considering your business, make a list of things that you...  

a. Do for your business that you want to stop doing...

b. Under the right circumstances, I would like to continue doing...

c. How much time per week would you like to spend on those things you want to continue with?

3. What are the skills you possess that would be valuable to others? How could these be re-deployed?

4. Who else can provide you with input and ideas to plan for the next season of life?

5. What are your fears and concerns when considering the post-business future?

6. Use the list you have developed as a basis for thoughtful discussion with your spouse, advisors, and trusted counsel.

Then, begin to develop a draft plan for near-term (12 months), midterm (3 years), and long-term (10+ years) goals; as with any "strategic plan," assumptions and plans will change. Take small steps to begin what you want to change, and don't be afraid to refine the plan.  

Planning before circumstances force you to act under pressure enables you to strike a peaceful balance between reality and the future heart's desires. You will be able to minimize regrets. The hardest part of effective long-term planning is taking the first step. Start now!

Get started today with our Free ExitMap Readiness Assessment.

2024 ExitReadiness Checklist

As a business owner, your future exit is a significant event. That's why we publish the "Exitreadiness Checklist" annually to assist you in planning.

DECIDE WHERE YOU WANT TO GO. 

Establish Clear Goals and Objectives for Exit and Your Life After Exit.

• When do you want to leave the business? Whom do you wish to transfer/sell the business to?

• What are your values-based and legacy exit goals?

• What is your post-exit life plan? Business owners often regret leaving when they lack a plan for life that replaces the sense of purpose and meaning they experienced in building their business.

• Update your Personal Financial Plan. Find out how much $$$$ you will need post-exit to do all you want to do. Is there a gap?

ASSESS BUSINESS AND PERSONAL EXITREADINESS. 

Without Accurate Data, All Planning Becomes Meaningless.

• Get an accurate Estimate of Business Value. If the business is your largest asset, shouldn't you know what it really is worth to potential buyers?

• Assess your business Value-Drivers and areas of Risk.

• Review your Business Continuity Plan for life transitions and unexpected death or disability to include written instructions. Co-owners should include a review of their Buy-Sell Agreement to ensure alignment with the current goals of all owners.

• Review your Estate Plan to ensure alignment with exit goals.

DESIGN AND IMPLEMENT A PLAN. 

Build Transferable Value and Enjoy a Future Exit on Your Own Terms and Conditions.

• Which Exit Route will best accomplish your goals? Sale to Third-Party | Sale to Insiders | Transfer to Family Members | Sale to ESOP | Absentee Owner.

• Focus on growth and profitability today. Today's profitability and growth plan is at the core of tomorrow's successful exit plan.

• Strengthen business value drivers. An owner with a sellable business will have more freedom in life and options for exit.

• Update a strategic financial plan for business growth.

• Do you have the right Team of Experienced Advisors in place for your plan design and implementation?

• Who will manage the exit planning project - you, an advisor, or an experienced exit planner?

In 2024, it's crucial to start planning and seek assistance if you haven't already. If you wait until the last minute to plan your exit, you may not attain your goals for life after the business. Remember, you may not be aware of everything you need to know, and ignoring this fact could have negative consequences, just like in other aspects of life.

Below are suggested next steps:

Contact Us Today for a No-Obligation Exit Planning Exploratory Meeting. 

Take the Free ExitMap Readiness Assessment and get Online Learning and Resources at exitreadiness.com.

What Are The Key Steps in Creating My Business Exit Strategy?

Creating a business exit strategy involves planning and preparation.

Planning for your eventual transition is a significant undertaking with much at stake. It can take years of planning and preparation to execute a successful plan.

Following are some critical elements to consider when developing your exit strategy:

1. Establish Your Goals and Objectives: Clarify your personal and financial goals for exiting the business. Are you looking to maximize the financial return, ensure a smooth transition, preserve the legacy of the business, or prioritize your well-being? Identifying your objectives will help guide your decisions throughout the exit process.

2. Timing: Determine the ideal timeline for your exit. Consider factors such as market and industry conditions and trends, business performance, personal circumstances, and any external events that may impact the timing of your departure. It is essential to give yourself enough time to prepare the business and maximize its value.

3. Valuation: Conduct a thorough business valuation to determine its worth. Engage the services of a professional business valuation specialist to assess the fair market value of your business. This valuation will help you understand the financial implications of your exit strategy and assist in setting a realistic asking price.

4. Succession Planning: Decide how you want to transition ownership and leadership of the business. This could involve grooming and training a successor within the organization, selling to a third party, transferring ownership to family members, or considering a management buyout. Develop a plan for developing and preparing the next generation of leaders if you choose an internal succession.

5. Prepare the Business for Sale: Take steps to maximize the value of your business before putting it on the market. This may include strengthening essential business functions, improving financial performance, enhancing operational efficiencies, and addressing legal or regulatory compliance issues. Create accurate and up-to-date financial records, streamline processes, and improve the attractiveness of the business to potential buyers.

6. Seek Professional Advice: Establish an advisor team of experienced professionals specializing in business exits. They can guide you through the legal, financial, and tax implications of your exit strategy, provide valuable insight, and help navigate the complexities of the process.

7. Consider Tax and Legal Implications: Understand the tax consequences associated with your exit strategy. Consult with a tax advisor to explore options for minimizing tax liabilities and maximizing your after-tax proceeds. Review any legal agreements, contracts, licenses, or leases that may impact the sale or transfer of the business and address any potential legal issues.

8. Communicate and Plan for Transition: Develop a comprehensive communication plan to inform and involve key stakeholders, such as employees, customers, suppliers, and business partners, about your exit strategy. Consider minimizing any disruption during the transition and ensuring a smooth handover of responsibilities.

9. Personal Wealth and Estate Planning: Review your financial situation and ensure that your personal wealth management and estate planning align with your exit strategy. Work with a financial advisor and estate planner to address wealth preservation, retirement planning, asset protection, and estate distribution issues.

Remember, creating an exit strategy is a complex process that requires careful consideration and planning. It's essential to start early, seek professional advice, and regularly review and update your plan as circumstances change.

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

Do I Need an Investment Banker or a Business Broker?

Suppose you have decided through planning and analysis that the ideal exit route for you is a sale to a third-party buyer. In that case, a skilled and experienced transaction intermediary will play a key role on your advisor team. Typically clients will have questions regarding the differences between business brokers and investment bankers and which would be best for their situation. Following are some key differences:

Role and Function:

• Investment Banker:

  • Investment bankers typically work for financial institutions and advisory firms. They provide clients with comprehensive financial and strategic advisory services, including mergers and acquisitions (M&A) advice.

  • They focus on more complex transactions, often involving larger companies and higher deal values.

  • Investment bankers help clients raise capital through various means, such as initial public offerings (IPOs), private placements, and debt offerings.

  • They provide strategic advice, financial analysis, valuation, negotiation, and deal structuring services to optimize the transaction's outcome.

• Business Broker:

  • Business brokers are intermediaries who assist in selling small to mid-sized businesses, usually privately owned or family-owned.

  • They primarily focus on facilitating the sale of existing businesses, often in the form of asset sales or stock sales.

  • Business brokers typically deal with businesses with lower market capitalizations and deal sizes.

  • They connect buyers and sellers, assist with business valuations, marketing, and negotiations, and help manage the transaction process.

Clientele:

• Investment Banker:

  • Investment bankers work with giant corporations, institutional investors, and high-net-worth individuals.

  • They are retained by companies seeking to engage in complex M&A deals, capital-raising activities, or strategic financial advice.

• Business Broker:

  • Business brokers work with small and mid-sized business owners who want to sell their businesses.

  • They also work with individuals or investors looking to purchase existing businesses.

Expertise and Services:

• Investment Banker:

  • Investment bankers have deep financial expertise and provide various services, including financial modeling, due diligence, legal and regulatory compliance, and market research.

  • They often have industry-specific knowledge and relationships with potential buyers or investors.

• Business Broker:

  • Business brokers focus on marketing and selling businesses and typically have a strong understanding of the local market.

  • They assist with business valuation, preparing businesses for sale, and handling negotiations. Still, their services may not be as comprehensive as investment bankers.

Compensation:

• Investment Banker:

  • Investment bankers typically charge fees based on a percentage of the transaction value (e.g., success fees). They may also receive retainer fees for their advisory services.

• Business Broker:

  • Business brokers often earn commissions based on the sale price of the business. The commission percentage can vary depending on the size and complexity of the transaction.

In summary, investment bankers and business brokers serve different market segments and offer distinct services. Investment bankers focus more on complex financial transactions for larger companies. At the same time, business brokers specialize in helping small and mid-sized businesses change ownership. The choice between the two depends on the specific needs and goals of the parties involved in the transaction.

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

Planning Ahead for Exit has Many Benefits

The truth of the matter is, every small business owner will eventually transition from the business.  While most have spent much time working in the business, and at times on the business, they have not given much thought to what to do after the business.

Whether you love your work so much that, in a manner of speaking, you’d be happy to die at your desk, or you’d like to devote much more time to your golf game, every small business owner needs to consider how they plan to exit.  And planning ahead has significant benefits.

There are three major objectives that a business owner should consider prior to reaching the point where they must exit the business.

• Timing of your exit – When do you want to leave?

• Financial needs after exit – how will you support the post-exit lifestyle you desire?

• Who's going to take care of your baby and run the business when you're not there?

1.     When do you want to leave the business? Unless you want to die at the desk, you’ll want to consider at what point you desire to make the transition.  Pick a time frame and begin considering the implications of that time frame.   When do you back out of the day-to-day operations?  How long do you take to do this...years or months?  Can I effectively transfer the company to whom I wish to transfer it within that period of time?  How long will it take to train my successor or children to be owners?  Will I be able to realize my financial goals within that time frame?  Will market conditions lend toward a successful sale to a third party?  The time frame you decide on is a key driver.  And, it's essential to establish at least a target date, or you could end up on the perpetual "I'm going to leave in around five years..." merry-go-round.

2.  What income do you need?  Depending upon the success of the organization, answers to this question vary widely. You may not require any income from the business and would happily pass on the business to family members or key employees without any benefit to yourself.  However, The large majority of owners require some type of income either from the business at the sale or a residual income stream from the ongoing operations of the business. There are a wide variety of approaches to defining how a payout can occur, as well as the timing of it. Engaging tax lawyers and accountants at this point is significant to walk alongside your financial planner to plan out the remaining years so that you can enjoy the standard of living that you desire as well as pass on value to your children, your state, or your favorite charity.  As much as we all enjoy supporting our local and federal governments, wise tax planning in this phase is very significant. Making the wrong choice can result in significant tax consequences, hindering your ability to use the value that you have built into the company.

3.  Who's going to watch over your company?  Hopefully, you have enjoyed working in your business and there is a sense of giving up "your baby" to someone else.  The choice of a successor is a significant, and often emotional decision.  There's the emotional aspect of giving up your hard-won successful business, as well as a desire to take care of those faithful employees who have served over the years in your company.  Several options exist, from passing the business on to two children, selling it to key employees, selling it to a trusted third party, or even an employee stock ownership program.  So significant factors come into play here - the most critical being who actually has the skills, knowledge, and temperament to own and run the company as well as you have.

Should a business owner have family in the business, the above questions become even more significant. Taking the time to thoroughly discuss your goals and desires with your spouse, children in the business, and children not in the business are all very significant.  It's often been said, that on our deathbed we do not desire to have another day in the office, but another day with our family.  Planning ahead enables conversations to be had so everyone's expectations are clearly understood prior to the day when the transition actually occurs.

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

Seven Questions Every Small Business Owner Should Answer

A company with strong value drivers can demand (and receive) a higher multiple on the same amount of EBITDA than can a company with average value drivers.  — John Brown, The Business Enterprise Institute (BEI)

Almost all of us consider the future and invest in the stock market either directly or through retirement plans to position ourselves and our families for the inevitable future.  While the above quote refers to investing in the stock market, the principle applies to your small business.  As you look ahead to the future, every small business owner should pay careful attention to the value drivers behind the business – ensuring the business portfolio increases over time.

In their book Execution, Ram Charan and Larry Bossidy speak about successful execution as “exposing reality and acting on that reality”.  So, as you consider your business investment, ask yourself the following “Value Driver questions:

 1.         Do I have a healthy management team?   It's often been said that people are our most valuable resource. Experienced leadership, that understands the business, as well as the culture of the organization, are critical to the ongoing success of the business. This is also one of the key factors behind developing business value when it comes down to selling your business.   Cultivating these employees, and ensuring that they remain even after you sell the business is significant to the events or buyer/owner of the business

2.         How effective are my operating systems?  Human resources, personnel recruitment and training, asset control, production control, and performance reports are all the key ingredients of healthy operations within any organization. If these internal mechanics are not running well, this could have significant negative consequences on the value of the organization.

3.         Are my margins equal to or better than the industry average?  If not, what actions can will it take to get them there?

4.         How diverse is my customer base?  Having one's eggs in one basket is always a risk. Having a key single customer that has more than 10% of total sales obviously is a downside for a business. Long before being ready to sell it is helpful to take a look at this and pursue diversification.

5.         Is my facility in “ship-shape”?  - keeping our home reflects our values, and our priorities. Similarly, keeping our business facility in sharp condition reflecting professionalism and effectiveness is critical to establishing business value. It was so into an outside third party, first impressions are significant. They were plucked attention to the small details.

6.         What is my growth strategy?   The roadmap for growth needs to clearly laid out, risks identified, and goals established.  Future cash flow, value and well-being of your employees is dependent on a vision for the future codified into actionable steps.  The plan alone will not get you there, but no plan will get you no-where.

7.         Do I have control of my numbers?  At the end of the day, you need to understand the financial health of your business.

Exit planning should begin the day you start your business.  And, at the core, or center of exit planning is maximizing the value of your business.  Just as you manage the value of your 401k or investment portfolio, investing time, energy and thought into building the value of your business will position you to exit in the manner you desire.  Get started today by exposing reality and assessing your business value drivers.

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

An Exit Planning Checklist for 2023

Each year at this time we publish our “Exit Planning Checklist” meant to serve you in planning for that most significant event as a business owner...your future exit. 

DECIDE WHERE YOU WANT TO GO.  Establish Clear Goals and Objectives for Exit and Your Life After Exit.

• When do you want to leave the business? Whom do you wish to transfer/sell the business to?

• What are your values-based and legacy exit goals?

• What is your post-exit "life-plan"? Business owners can often regret leaving when lacking a plan for life that replaces the sense of purpose and meaning they experienced in building their business.

• Update your Personal Financial Plan. Find out how much $$$$ you will need post-exit to do all you want to do. Is there a gap?

ASSESS WHERE YOU ARE.  Without Accurate Data All Planning Becomes Meaningless.

• Get an accurate Estimate of Business Value. If the business is your largest asset, shouldn't you know what it really is worth to potential buyers?

• Assess your business Value-Drivers and areas of Risk.

• Review your Business Continuity Plan for life transitions and unexpected death or disability to include written instructions. Co-Owners should include a review of their Buy-Sell Agreement to ensure alignment with the current goals of all owners.

• Review your Estate Plan to ensure alignment with exit goals.

DESIGN AND IMPLEMENT A PLAN.  Build Transferable Value and Enjoy a Future Exit on Your Own Terms and Conditions.

• Which Exit Route will best accomplish your goals? Sale to Third-Party | Sale to Insiders | Transfer to Family Members | Sale to ESOP | Absentee Owner.

• Focus on growth and profitability today. At the core of tomorrow's successful exit plan is today's profitability and plan for growth.

• Strengthen business value drivers. An owner with a sellable business will have more freedom in life and options for exit.

• Update a strategic financial plan for business growth.

• Do you have the right Team of Experienced Advisors in place for your plan design and implementation?

• Who will Manage the Exit Planning Project? You, a current Advisor, or an experienced Exit Planner?

The most important thing you could do in 2023 would be to GET STARTED AND GET HELP if you have yet to do so.  If you wait until “you're ready to exit” to begin planning, you won't be ready, and neither will your business.  Keep in mind, that "You don't know what you don't know" and like in all other areas of life, that could end up being disastrous. 

There is much at stake during this most significant event in your life as a business owner.  Take steps in 2023 to be as successful in planning your eventual exit as you have been in running your business. 

Following are some easy Next Steps:

Contact Us Today for a No-Obligation Exit Planning Exploratory Meeting. 

Take the Free ExitMap Readiness Assessment and get Online Learning and Resources at exitreadiness.com.

Deal Momentum, Deal Fatigue, and Pre-Sale Diligence

With the help of her Exit Planning Advisor, Betty has decided that a sale to a third-party buyer would best accomplish all of her goals (financial; values-based; legacy).

The process of quantifying her business and personal resources, with a financial gap analysis, has been helpful to Betty in determining her departure date in six years. She now knows the current fair market value of her business, and how much it will need to increase in value for the attainment of her financial objectives at sale in six years.

Betty now also understands (again with the help of her Exit Planning Advisor) the importance of maintaining “deal momentum” when she eventually enters into a sale transaction.

Betty now knows that all too often “deal fatigue” sets in and damages or destroys deal momentum experienced early in the process. She also understands that deal fatigue is typically the result of a difficult and lengthy due diligence process. Due diligence is defined as the process by which the buyer requests documents, data, and other information pertaining to the business they want to review to identify any potential liabilities or hindrances to a deal getting done. The process of due diligence involves setting up a digital “Data Room” where all requested information is deposited for review.

A key component of Betty’s comprehensive plan for exit is to do everything possible to ensure deal momentum and avoid deal fatigue when the time comes.

Betty also wants to be prepared if a serious and qualified buyer comes calling earlier than her six-year time frame. So, with the assistance of her Exit Planning Advisor, she is going to conduct “Pre-Sale Diligence” systematically over the next 12 months, including the set-up of a virtual data room which she will regularly review and update as needed. This preemptive approach will significantly increase her chances of deal momentum and a smooth transaction experience.

At that point in the future, when Betty’s either approached by a potential buyer or when she takes her business to market, having conducted Pre-Sale Diligence, she will be better prepared, more confident, and less stressed and anxious — all of which lend toward sustaining deal momentum and a successful transaction.

---

Contact us if you would like assistance with Pre-Sale Diligence | email@ennislp.com | 301-943-8203

Complete our FREE ExitMap® Assessment and get a 12-page report scoring you in four key planning areas: Finance, Planning, Profit/Revenue, and Operations. It will take about 15 minutes and we do not ask for confidential information.

The Pursuit of Better

Exit Planning, by definition, has an end-game in mind.  This implies defining the goals, planning the strategy to reach them, and executing the plan.   I am a huge fan of the annual strategic planning and budgeting process – they are foundational.   However, many businesses have great plans on paper and yet fail to finish well.   Why? 

I just finished reading a book entitled “Better” by a surgeon named Atul Gawande.   In a profession where lives literally depend on how well one does one’s job, he has a passion for the pursuit of improvement in every area of medicine.  He shares numerous examples of how doctors in less developed parts of the world have actually developed far more successful processes than wealthier countries.  The major message is – they pursue delivering a “better” service to their clients.

An underlying theme is that improvement comes through a long-term commitment to improvement – in the big and small things.  And there are two sides to this:

1. Don’t settle for “good enough” – always seek to serve your customers better – with a better, cheaper, more effective product or service.

2. Persevere in overcoming obstacles – take the long view to solve the problems that face you.

Obviously, this is a team effort and he makes five simple recommendations that can help build a culture of “better”: (I have listed his recommendations and “translated” them to “business speak”).

1.   Ask unscripted questions -    Ask fresh, unplanned questions - what don’t you know about your customers?  Take the time, not just to do surveys, but think out of the box; explore getting to know your customers better so that you can serve them better.  Have real people connect with real people and ask honest questions. “Listen” to what you hear.”

2. Don’t complain.   Don’t complain about the challenges – every business has challenges that need to be overcome. At times they may seem just “too hard”, however focusing on the problem can be an excuse to not try to overcome it.  Persevere in solving the problem. 

3.  Count something -  Every business has an income statement and balance sheet, however, what really drives your business?  Think outside of the box to measure the performance of the business, so that every area can be measured (often called KPIs).  Quantifying “good” can help you move to “better”.  Then, when your numbers don’t look like they should, ask why to assess and adjust. 

4.   Write something   -  In a book called “Poke the Box” Seth Godin suggests things change when people take the initiative to start something.  Write down ideas, communicate them and act on them - encourage others to do the same.  

5.   Change -   Change hasn’t happened until change happens.  identifying problems, writing about it, and talking about it accomplishes nothing unless things are put into action.  This requires a willingness to change “the way we have always done it”.  Many successes come through failed attempts at change and learning from those mistakes.  

So, start today.  Pick one area where you can improve and pursue making it better.  Then repeat.

 Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

'''What You Don't Know Won't Hurt You!"

Have you ever heard the old saying, “What you don’t know won’t hurt you”?  Not sure why, or who it was in my life at the time would say it, but I remember hearing it a lot when I was a kid.  Through the years I’ve found this saying, through personal experience and observation, severely misleading at best.  I wonder if the person who originated the phrase had only “current hurt” in mind.  For example, I might be unaware that my car has no engine oil and that the engine is going to die exactly a week from today – but today, because I don’t know it, it doesn’t hurt.  However, in a week when the car blows up and catches on fire, there is a lot that’s going to hurt.  So, what you don’t know, can absolutely hurt you, and often does…it simply may not be immediate.

If you’re a successful business owner, your business may be your biggest asset, and play a key role in whatever represents success for you in the future (i.e., financial, values-based, or legacy goals).  You may understand there are things you need to know about how ready you are, and how ready your business is for you to leave on your own terms and conditions. But you’ve chosen not to know, as it will surely result in additional work, time, and/or financial investment…and because “what you don’t know, currently isn’t hurting you.”  It may not hurt now, but the hurt that comes later could be devastating when you eventually leave your business if you then learn that your financial, values-based, and legacy goals are not going to be realized. 

Take steps now to expose reality and get the knowledge you need then act on it.  And get help…because you don't know what you don't know.  

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

"Five Years...That's When I'm Planning to Leave..."

We refer to it in the exit planning trade as the "perpetual five-year exit plan".  When asking a business owner when they plan to exit their business, the following is a fairly common response:  "Not sure but probably about five years from now..."  And it’s not unusual to get the same response year after year from the same owner.  There can be numerous and varied reasons for the response, but a lack of planning is often primary. 

The problem is that if you don't begin planning now, you and your business may not be ready for you to exit in five years, and it could end up being necessary for you to plan and wait for another five years in order to attain your goals.

In our effort to help you avoid the perpetual five-year plan, the following is our "2021 Exit Planning To-Do List" we posted at the end of last year to help you get started. 

DECIDE WHERE YOU WANT TO GO.  Establish Clear Goals and Objectives for Exit and Your Life After Exit.

• When do you want to leave the business? Whom do you wish to transfer/sell the business to?

• What are your values-based and legacy exit goals?

• What is your post-exit "life plan"? Business owners can often regret leaving when lacking a plan for life that replaces the sense of purpose and meaning they experienced in building their business.

• Update your Personal Financial Plan. Find out how much $$$$ you will need post-exit to do all you want to do. Is there a gap?

ASSESS WHERE YOU ARE.  Without Accurate Data All Planning Becomes Meaningless.

• Get an accurate Business Valuation. If the business is your largest asset shouldn't you know what it really is worth to potential buyers?

• Assess your business Value-Drivers and areas of Risk.

• Review your Business Continuity Plan for life transitions and unexpected death or disability. Co-Owners would include a review of their Buy-Sell Agreement to ensure alignment with current goals of all owners.

• Review Estate Plan to ensure alignment with exit goals.

DESIGN AND IMPLEMENT A PLAN.  Build Transferable Value and Enjoy a Future Exit On Your Own Terms and Conditions.

• Which Exit Route will best accomplish your goals? Sale to Third-Party | Sale to Insiders | Transfer to Family Members | Sale to ESOP | Absentee Owner.

• Focus on growth and profitability today. At the core of tomorrow's successful exit plan is today's profitability and plan for growth.

• Strengthen business value drivers.

• Update strategic financial plan for the business.

• Do you have the right Team of Experienced Advisors for plan design and implementation?

• Who will Manage the Exit Planning Project?

Following are some easy next steps:

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

Contact us for an exploratory conversation if you need help in designing or implementing your plan for a successful exit.

Be Happy And In Control Like George

It wasn’t until the 4th hole that Fred and John started talking about their businesses today during their morning round of 18 holes. Through 20 years of Saturday morning golf, by the first tee they typically would have analyzed and forecasted the economy, reported on sales and profitability, or ranted about the most urgent “fire that needs to be put out”. But this Saturday was different because Fred had an entirely different mess on his hands that he really didn’t want to think or talk about until John made the mistake of asking, “What’s going on?” Over the next 14 holes, John was forced to endure Fred’s scary (but sometimes humorous) tale about his “transition plan” out of the business. John thought more than a few times, “Man, sorry I asked.”

By the 7th hole, Fred was grumbling how he “had no idea” about all that was involved in planning his departure from the business — “I figured it would just mean sitting across a table from a buyer, we agree to a price, sign some legal papers with a couple of attorneys, they give me a check, I give them the keys, and it’s a done deal! Well, I had that all wrong my friend!”.

As they made the turn John now felt his anxiety level steadily rising with each passing tee box — and it was due to more than the missed putts. He was learning much more than he wanted to about the countless planning issues that have come up for Fred personally and for the business in this process — tax planning, estate planning, business valuation, a plan for future business growth and grooming successor, planning for life after the business, business continuity, and on and on and on!

Fred also painted a gloomy picture of how he was the one in the middle of everything working around the clock to coordinate the needed advisors and work. As Fred walked to the 14th tee (John really wasn’t listening at this point) he said, “Most of the time I have no idea what they’re even talking about! I don’t know if they ‘re collaborating the way they should and if the right questions are being asked or answered — I just don’t know if it’s all getting done right…while in the meantime professional fees are piling up! I’m having a hard time sleeping at night! And it’s absolutely affecting my golf game!”

After slicing his tee shot into the water hazard on the right side of the fairway, Fred started up again on his way back to the golf cart…”And if that’s not enough, the business is struggling because I’ve taken my eye off the ball to manage this project! Both sales and profitability have suffered so much I wonder if I will now get the $$$$ I need when I sell!” John asked, “Why don’t you have your CPA Sarah or your Attorney Bob coordinate everything — be like a project manager?” Fred responded that he had asked them both but neither had any desire to manage the project and simply wanted to “stay in their lane” of expertise.

Exhausted and a bit defeated after tallying the scores, Fred and John bellied up to the bar at the 19th hole. A few minutes later George walked in and joined a table across the room. Fred remembered that George had successfully sold his business a year ago and that George never seemed stressed, either during the process, that took a couple of years, or since selling. “George never seemed freaked out …never…he always seemed to have everything under control…what’s his secret John you know George well???” Fred said in a deflated tone. John was quick to respond, “Well…I know he had one of those Exit Planners or Advisors or whatever they’re called doing everything you’ve been complaining about …and you can bet your bottom dollar on this…that’s exactly what I’m going to do after listening to you all day!!!”

Be happy and in control like George and engage us to lead your Exit Planning project. There is much at stake, including your sanity and peace of mind.

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

email@ennislp.com | 301-859-0860

Will Deciding on Exit Strategy be Easy or Difficult?

For most small business owners, deciding as to how they exit will be easy, because they will have few options.

The majority of small business owners, based on research, will choose between selling assets to a third-party buyer or simply shutting down when they’re done being a business owner. To realize the maximum number of options for exit, an owner needs to invest both time and money, and few do this systematically and strategically over time with the end in view. The result is fewer options for exit and a forced “easy exit decision”.

Those of you who do plan, build a business that is transferable, and hence have more exit options, might be (in a good way!) further challenged when making the final decision as to what exit path to execute.

Betty founded her business over twenty years ago, and was strategic in her approach to building a transferable business and planning for her eventual exit — she continually had the end in view when planning for business growth today. From the beginning, Betty’s plan was to eventually sell to a third-party buyer and that is absolutely a current possibility as she’s recently been approached by a few potential buyers. Betty would now like to leave completely in the next 2-3 years, so a sale with an earnout could be the answer.

However, Betty now has other interests and goals, in addition to her financial goals — she has two children in the business that have shown interest and promise in being future owners — Betty would very much like to see the values and culture of the business sustained in the future — and finally, she’d like to ensure the future of key employees who have helped her grow the business through the years. These “values-based” goals more align with either an ESOP (Employee Stock Ownership Plan), sale to a key employee group, or transfer to the children.

The good news for Betty has many options for exit, so she can give legitimate and serious consideration to all of her values-based and legacy goals.

More challenging for sure, but good challenges as Betty has the flexibility to accomplish all of her goals in choosing the best-aligned exit strategy. She is not limited as to her options — Betty is positioned to do a third-party sale, sale to insiders, an ESOP, a transfer to children, or a combination.

Betty is again enjoying the benefit of having an experienced and trained Exit Planner assist in thinking through all the pertinent issues.

In Betty’s case, there is an understanding that having a “tough exit decision”, is actually a good thing because it’s due to her various exit options and goals. Betty’s Exit Planner helped to get her to this point and is again adding value in designing and implementing the final decision. She is grateful for the exit options available to her and the flexibility for personal goal attainment which are the good fruits of wisely investing in a strategic exit plan from the inception of her business.

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

Build To Keep As An Exit Route

Helping business owners clarify and establish their post-exit bucket list, financial, values-based and legacy goals, and choosing an exit route that provides them with the greatest opportunity to realize their goals, is what we most enjoy about the work we do. 

Establishing clear goals is essential and foundational for a successful exit plan.  For example, if an owner's passions now fall mostly outside of the business, selling to a third-party or an ESOP might afford them the most time and money, sooner rather than later, to pursue those non-business related interests.  Or, perhaps a sale-to-insiders or children could make the most sense if an owner has strong desires to transfer the business to those who helped build it, or to keep the business in the family. 

But what about "keeping the business"?  Is keeping the business a legit exit strategy?  And, could keeping the business best help me realize all my goals and objectives? 

First, keeping the business is indeed an exit strategy in that you would simply own the business until it was transferred, or shut down, upon your exit at death.  Too often this an exit route by default, due to a lack of strategic planning, not resulting in the true desires of the business owner being fulfilled.  However, with the right planning, keeping the business and transferring it at death, may certainly be the strategy that will prove most impactful in goal attainment. 

We have found that an owner who builds their business to keep it with the flexibility to accomplish all of their non-business goals and objectives, can end up having the greatest number of options for their eventual exit.  Let me explain.  If an owner builds in a way that allows them to realize their goal of traveling the world most of the year, and the business continues to prosper and grow while they're away, they have built a business others will want to own.  This owner would have the ability to attract third-party buyers and possibly have them bid for their business in a controlled-auction (depending on the size of the business).  However, this same owner may have an exit goal of transfer to key employees who have been instrumental in its growth.  Because the key employees currently run the business and it's very profitable, the owner is able to seriously consider the sale-to-insiders option, or perhaps an ESOP.  Or...now that this owner much enjoys owning their business (that has been "built to keep") and all of their goals are best attained by keeping it, their exit strategy might become keeping the business and transferring it at death.  This owner has more options because they have built a business that others want to own, but that they don't have to sell in order to accomplish their personal and financial goals.  They built it so they could keep it (if desired) and still pursue all of their non-business goals and dreams.

If you "build to keep" in a way that affords you the time and money to accomplish your non-business goals and objectives, you can increase your options for a successful exit.

Contact us through ennislp.com if you need help in clarifying your goals and objectives or building to keep.

Invest 12-15 minutes in the FREE ExitMap® Assessment and get a 12-page report scoring you in four key exit planning areas: Finance, Planning, Revenue/Profit, and Operations.

A Succession Plan or an Exit Plan? Savvy Business Owners Have Both!

One of the questions we often hear from business owners is, “What is the difference between Succession Planning and Exit Planning?  Aren’t they the same thing?”  Surprisingly, they are not.  The next question usually is, “Which one do I need?” The answer is simple.  Whether the business is small or large, family-owned or not, astute business owners always need both.

Nearly $10 trillion dollars in business assets will be transferred globally in the next decade, according to Forbes Magazine.  Baby Boomers selling privately owned businesses or transferring them to family members will comprise much of that $10 trillion dollar transfer.  As the market becomes crowded with owners ready to sell, the advantage will go to those owners who have done their due diligence, considered all of their options, and planned for unexpected contingencies.

Succession Planning

Succession Planning focuses solely on transferring leadership inside the business from one generation to the next.  Succession plans identify key individuals within the organization who can be trained and mentored to someday take over as the existing business leaders exit.  Succession Planning is just one necessary aspect of a more comprehensive exit plan.

Exit Planning

Exit Planning incorporates succession planning with strategies for building transferrable value, reducing tax liability, preparing for unexpected contingencies, minimizing family stresses, and increasing the likelihood of a successful business transfer.  Exit plans also incorporate the personal and financial goals of the business owner, their spouse, and their family.  A prudent exit plan starts and ends with the long term business and personal objectives of the owner.

Plan Ahead for A Successful Exit

Succession plans and exit plans so share an important characteristic – neither should wait.  Business owners who eventually want to sell for top dollar with the least amount of trouble must start the planning process early enough to give it the thought and consideration it requires.   With the proper plans in place, you, the business owner, gains the ability to make critical long-term decisions that will significantly increase the likelihood of selling or transferring the business when you want, to whom you want, and for the price you want.

Take our FREE 15-Minute ExitMap® Assessment and find out how ready you are to exit successfully.

2022 Exit Planning Checklist

Like any strategic plan, it can be difficult to know how and where to begin strategically planning for your exit.  To help you along, the following is a baseline "2022 Exit Action List" meant to serve you in planning for that most significant event as a business owner...your future exit. 

DECIDE WHERE YOU WANT TO GO.  Establish Clear Goals and Objectives for Exit and Your Life After Exit.

• When do you want to leave the business? Whom do you wish to transfer/sell the business to?

• What are your values-based and legacy exit goals?

• What is your post-exit "life-plan"? Business owners can often regret leaving when lacking a plan for life that replaces the sense of purpose and meaning they experienced in building their business.

• Update your Personal Financial Plan. Find out how much $$$$ you will need post-exit to do all you want to do. Is there a gap?

ASSESS WHERE YOU ARE.  Without Accurate Data All Planning Becomes Meaningless.

• Get an accurate Estimate of Business Value. If the business is your largest asset, shouldn't you know what it really is worth to potential buyers?

• Assess your business Value-Drivers and areas of Risk.

• Review your Business Continuity Plan for life transitions and unexpected death or disability to include written instructions. Co-Owners should include a review of their Buy-Sell Agreement to ensure alignment with the current goals of all owners.

• Review your Estate Plan to ensure alignment with exit goals.

DESIGN AND IMPLEMENT A PLAN.  Build Transferable Value and Enjoy a Future Exit on Your Own Terms and Conditions.

• Which Exit Route will best accomplish your goals? Sale to Third-Party | Sale to Insiders | Transfer to Family Members | Sale to ESOP | Absentee Owner.

• Focus on growth and profitability today. At the core of tomorrow's successful exit plan is today's profitability and plan for growth.

• Strengthen business value drivers. An owner with a sellable business will have more freedom in life and options for exit.

• Update a strategic financial plan for business growth.

• Do you have the right Team of Experienced Advisors in place for your plan design and implementation?

• Who will Manage the Exit Planning Project? You, a current Advisor, or an experienced Exit Planner?

The most important thing you could do in 2022 would be to GET STARTED AND GET HELP if you have yet to do so.  If you wait until “you're ready to exit” to begin planning, you won't be ready, and neither will your business.  Keep in mind, that "You don't know what you don't know" and like in all other areas of life, that could end up being disastrous. 

There is much at stake during this most significant event in your life as a business owner.  Take steps in 2022 to be as successful in planning your eventual exit as you have been in running your business. 

Following are some easy Next Steps:

Contact Us Today for a No-Obligation Exit Planning Exploratory Meeting. 

Take the Free ExitMap Readiness Assessment and get Online Learning and Resources at exitreadiness.com.