I am a Passive Investor in the stock market – I use the “park it and forget it” approach.  Active investing seeks to outperform the market and requires paying constant attention to the market,  in order to buy and sell specific securities at just the right time to maximize your gain.

Every business owner benefits from the income they receive from their business, however, the business is not viewed as an asset.  Yet, for most business owners,  the most significant asset in their portfolio is their business and often plays an important role in the owner’s ability to retire.  The ability to sell the business for a good price is critical.

In business, one key aspect often separates successful ventures from those that struggle to thrive: systems documentation. It's the roadmap, the blueprint outlining how a business operates, from its day-to-day processes to long-term strategies. In a recent ExitReadiness® PODCAST episode with guest Jason Henderberg, we discussed how meticulous system documentation can significantly enhance a business's value, ultimately paving the way for a higher sales multiple.

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.

In his book, “Think Again, The Power of Knowing What You Don’t Know,” New York Times bestselling author Adam Grant makes a compelling case for “the critical art of rethinking: learning to question your opinions and open other people’s minds, which can position you for excellence at work and wisdom in life.”

Key employees are the driving force behind a company's success, and recognizing and nurturing their talents is essential for sustained growth and value acceleration. In this blog post, we will explore the importance of key employees, the characteristics that define them, and how you can identify them within your organization.

If you plan to exit your business in three years and you’ve yet to begin preparing, the following are some suggested steps you can take to prepare for a successful transition…

A Certified Business Valuation is a comprehensive assessment conducted by a qualified professional to determine the fair market value of a business. It involves a systematic analysis of various factors such as financial statements, industry trends, market conditions, company assets, intellectual property, customer base, and other relevant aspects to estimate the worth of a business.

A Letter of Intent (LOI) is a document used when selling a business to outline the preliminary terms and conditions of the proposed transaction. While the specific content of an LOI can vary, here are some key points to consider…

When selling a business, the buyer typically conducts a due diligence process to gather and evaluate relevant information about the business. Due diligence aims to assess the business's risks, opportunities, and value before finalizing the transaction. While the specific scope and depth of due diligence can vary, here are some common areas that may be examined…

Key person insurance plays a vital role in protecting businesses from the financial impact of losing key individuals within the organization. It provides a safety net by compensating the company for the loss incurred due to the death or disability of a key employee. While key person insurance is a valuable risk management tool, business owners must understand the taxation aspects associated with these policies.

Every sale of a business requires negotiation.  The buyer is purchasing the future potential of the company and is aware that they can only learn so much in a due diligence process.  The seller’s strong management team, documented procedures, and portfolio of recurring revenue clients, and other value drivers will move a buyer forward. And, if a seller wants to further strengthen their story at the negotiation table they will be prepared with a documented strategic plan for future growth.

“The emotional aspect of an exit and transition is what’s hardest (paraphrased)”. This was a statement made by one client to another at a recent charity golf event. While listening to the conversation I was freshly reminded about what’s at stake when and how an owner leaves their business, that perhaps took them decades to build.

A business book that I read the book when it was first published, and find helpful to revisit regularly, is Execution: The Discipline of Getting Things Done by Larry Bossidy and Ram Charan. The authors’ definition of “execution” is particularly insightful and helpful when considering how an owner should build a business that is transferable, and in planning their eventual exit from the business

“Fundamentally, execution is the discipline of systematically exposing reality and acting on it.”

A key element for an exiting successfully on your own terms and conditions is realizing the role(s) that you’re willing to play post-sale or transfer.

John sold to a strategic buyer and an earn-out with John working as an employee for 3 years as part of the deal. He had not planned in a way to avoid this, and after 2 years decided to forfeit the balance of his payout and leave because he was finding it too difficult to work for the new management.

There have been not a few surveys of small business owners conducted that revealed a majority of the owners polled believed they needed a strategic plan for their eventual exit. Over 75% indicated they wanted to sell in the next 10 years, 90+% knew they needed a plan, while only about 20% had a written plan for what is inevitable…their eventual exit from their business.

So, why the procrastination? Well, we’ve observed the following reasons for putting it off, or not planning at all. And frankly, the reasons are understandable.

Up until a successor takes over as an owner, they have typically only ever been an employee.  Therefore, it is critical to help them begin adopting an Owner’s Mindset prior to handing over the keys.

Owners and employees generally think differently.  I remember when I first became the owner of a company.  I co-owned a restaurant development company, where developed our own restaurant chain and also developed a territory for a national franchise.

When we’ve lived in a house for years and then consider selling, we have the decision to make, “Do I upgrade things like the kitchen, bathrooms, and roof, or “sell as is”? Perhaps the potential seller wants or needs to sell quickly due to declining health or some other extenuating circumstance. And, the thought of making all the remodeling happen in a short period of time is painful. It will take a lot of time and money, and so they wonder “Should I just sell as is?”

A sole owner of a business who has a spouse and/or family has not a few key planning issues that need to be addressed before it’s too late.  “Too late” is the unexpected event of death or permanent incapacity or disability.  To illustrate, let’s use the following story that is based on real-life events…

Can you leave your business for a month, sit on the beach and leave your phone in the beach bag?  If so, you have attained what few business owners do – a business that can run without you!  Aside from sound cash flow, the creation of a management team is the most significant driver of business value.  When the time comes for you to leave for good, a buyer wants your team, not you!  If you can’t yet take that month, here are a few simple thoughts…