Discovering Purpose Beyond Business: Lessons from My Own Exit

As a business owner, your company is more than just a livelihood—it becomes an extension of your identity, a vessel for your dreams, and often the center of your world. For nearly two decades, Solly’s Bagelry was my life. Co-founding and growing it into a cherished Vancouver institution brought immeasurable pride and purpose. But when I exited the business, I faced a challenge I hadn’t fully anticipated: finding my footing in a world where I was no longer "Joe from Solly’s."

The transition was daunting. My business wasn’t just something I owned—it was part of who I was. When I left, I experienced what many former owners do: an overwhelming sense of loss. Suddenly, the purpose and identity that fueled my days were gone. Like 75% of former business owners, I felt regret and uncertainty within the first year of my exit. Despite my successful financial transaction, I was left with a void that took me years to fill.

It took me five long years to rebuild my sense of identity and rediscover a purpose that matched the passion I had for Solly’s. This journey led me to a profound realization: I wasn’t alone in this struggle. Many business owners, after years of dedicating their lives to their companies, find themselves unprepared for the emotional and existential shift that follows an exit.

This epiphany became my calling. I became a Certified Exit Planner, dedicating my career to helping business owners navigate the complexities of not just their business transitions, but the personal transitions that follow. My role is to ensure that owners don’t just survive their exit but thrive afterward, finding a renewed sense of purpose that propels them forward.

Today, I work with ENNIS Legacy Partners to offer a unique workshop series designed to help former business owners discover their ikigai—a Japanese concept meaning "reason for being." This program is a transformative journey, helping owners reconnect with what they love, what they’re good at, what the world needs, and what can bring them fulfillment and reward.

The workshop isn’t just about avoiding the pitfalls of regret and isolation—it’s about reigniting the fire in your belly, so you wake up every morning excited about what’s next. Whether it’s mentoring young entrepreneurs, pursuing a passion project, or creating a new legacy, the program helps business owners craft a future that inspires them.

My own experience has shown me that life after business can be just as meaningful as life during it—but only if you prepare for it. That preparation goes beyond financial planning; it’s about envisioning a life that aligns with your core values, passions, and aspirations.

If you’re contemplating an exit, I encourage you to start planning your next act now. Don’t wait until you’ve handed over the keys to think about what comes next. With the right guidance and a clear roadmap, you can turn what feels like an ending into an exciting new beginning.

Joseph (Joe) Markovitch is a Certified Exit Planner, Senior Business Advisor and former Owner of Solly’s Bagelry Ltd, a Vancouver institution. Joe helps owners worth $5 or more maximize their exit payout while reducing tax so they can have more time with family and live life on their terms. Let’s work together to ensure that your life after business is the chapter you’re most proud of. For more info: joe@joeco.ca or email@ennislp.com.

2025 Exit Planning 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? To whom do you wish to transfer/sell it?

• 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 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 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 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 2025, starting planning and seeking assistance is crucial 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 the suggested next steps:

Contact us today for a No-Obligation Exit Planning Exploratory Meeting: email@ennislp.com | 301-859-0860

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

Connelly vs United States and Succession Planning

The recent Connelly v. United States Supreme Court decision provides critical insight for closely held business owners considering succession planning and tax implications.

The Court's ruling clarifies that life insurance proceeds owned by a corporation, even if intended for share repurchase agreements, increase the corporation's value for estate tax purposes. This decision impacts business owners who use corporate-owned life insurance as part of their succession planning, as it reaffirms that the company's obligations to redeem shares do not reduce the company's valuation in terms of tax liability.

Key Takeaways from Connelly v. United States

1. Business Value Impact: Life insurance proceeds payable to the corporation increase the corporation's valuation, which affects the value of shares for estate tax calculations. In Connelly's case, the $3 million policy proceeds were added to the company's value upon Michael's death, which led to a substantial tax bill.

2. Planning Options: The Court suggested alternative structures, like a cross-purchase agreement where individual shareholders own policies on each other. This setup may avoid increasing the corporation's value upon a shareholder's death, potentially reducing estate tax exposure.

3. Professional Advisory Importance: This case underscores the value of consulting with tax professionals, insurance experts, and succession planners to design strategies that align with tax laws, which can help mitigate unexpected financial consequences.

Practical Steps for Business Owners

• Coordinate with your Advisory Team: Using a coordinated approach with legal, tax, and insurance professionals can ensure strategies align with tax regulations, reducing the risk of unintended tax liabilities.

• Consider Cross-Purchase Agreements: Cross-purchase agreements may provide tax advantages over corporate-owned life insurance policies for some businesses.

Connelly v. United States offers a valuable lesson in how business structure and tax planning interact. Proactively structuring ownership transitions could avoid similar tax outcomes, enabling smoother family business successions and a more straightforward path for future growth.

Contact us today for assistance in reviewing your current agreement: 301-859-0860 | email@ennislp.com.

An Intellectual Property Audit When Planning to Sell Your Business

An intellectual property (IP) audit is an important step before selling your business because it helps you identify, organize, protect, and maximize the value of your intangible assets. Intellectual property, such as trademarks, copyrights, patents, and trade secrets, can be a significant part of your business's overall value, and ensuring these assets are adequately managed is crucial to a successful sale.

Here's why an IP audit is a good idea before selling your business:

1. Identifies and Documents All IP Assets

• An IP audit helps you identify and document all intellectual property assets your business owns, including patents, trademarks, copyrights, trade secrets, domain names, software, and proprietary designs.

• This inventory is essential for you and potential buyers to understand the full scope of what’s being sold. Buyers often look for well-protected and valuable IP; a comprehensive audit ensures nothing is overlooked.

2. Confirms Ownership of Intellectual Property

• The audit verifies that your business clearly owns all intellectual property, especially if some of it was developed by employees, contractors, or third-party collaborators. It ensures that IP is not subject to disputes or claims from outside parties.

• Buyers need to be assured that the IP they purchase is legally owned and free of encumbrances, reducing their risk and increasing their confidence in the transaction.

3. Protects the Value of Your IP

• Correctly identifying and securing your IP through an audit can significantly increase the value of your business. Intellectual property is often one of the company's most valuable assets, particularly in technology, media, and creative industries.

• An IP audit allows you to highlight these assets in the sale process, ensuring they are recognized and factored into the valuation, which could lead to a higher selling price.

4. Ensures Proper IP Registration and Protection

• An IP audit confirms that all intellectual property is properly registered and legally protected. It ensures that patents, trademarks, and copyrights have been filed and renewed in relevant jurisdictions.

• Buyers are less likely to invest in a company with unregistered or inadequately protected IP, as it could expose them to legal risks or make it easier for competitors to infringe on valuable assets. Ensuring everything is in order strengthens your business's attractiveness.

5. Mitigates Legal and Infringement Risks

• An IP audit can help identify any infringement issues where competitors or third parties may be unlawfully using your IP and ensure your business isn’t unknowingly infringing on the IP rights of others.

• Resolving any IP disputes or potential legal challenges before the sale reduces the risk of post-sale liabilities and makes the deal more appealing to buyers who are concerned about acquiring a business with clean legal standing.

6. Verifies Transferability of IP

• An audit helps verify that your intellectual property is easily transferable to the new owner. Some IP, particularly patents or licenses, may come with conditions or limitations on transferability.

• Ensuring that all IP assets can be transferred without complications or restrictions is crucial for a smooth sale process. It reassures buyers that they will gain full control over the IP after the acquisition.

7. Provides Clarity on Licensing Agreements

• If your business is involved in licensing agreements—either licensing IP to others or using licensed IP—it’s essential to review these agreements to ensure compliance and proper documentation.

• Buyers need to understand the terms of any existing licenses, including whether they can be transferred or renegotiated. An IP audit clarifies these details and ensures that licensing arrangements won’t complicate the sale or decrease the value of the business.

8. Enhances Buyer Confidence

• A thorough IP audit sends a solid message to potential buyers that your business is professionally managed and its IP assets are well-documented, protected, and ready for transfer.

• Buyers are more likely to proceed with a deal if they fully see the business’s intellectual property assets, reducing uncertainty and legal risks. It can also help avoid last-minute delays or negotiations regarding IP ownership.

9. Increases Negotiating Power and Business Valuation

• Conducting an IP audit can highlight the strength and uniqueness of your intellectual property portfolio, which can become a powerful negotiating tool during the sale process.

• Buyers may be willing to pay a premium for businesses with solid IP assets that offer competitive advantages, such as exclusive technology, brand recognition, or proprietary processes. Demonstrating the total value of your IP can lead to a better sale price.

10. Prepares for Buyer’s Due Diligence

• Buyers will conduct due diligence to assess the intellectual property as part of the sale process. If your IP assets are disorganized or improperly protected, it can lead to delays, renegotiation, or even the deal's collapse.

• Conducting an IP audit beforehand allows you to anticipate buyer questions, organize all necessary documentation, and resolve any issues, making the due diligence process faster and smoother.

Conclusion

An intellectual property audit is a vital step when preparing to sell your business. It ensures your IP is properly identified, protected, and valued. It helps mitigate legal risks, strengthens your negotiating position, increases buyer confidence, and enhances the overall valuation of your business. Conducting a thorough IP audit ensures a smoother sale process and maximizes the return on your intellectual property assets.

Listen to the “Do You Have A Rembrandt In Your Business Attic? Ft. Erin Austin” episode of the ExitReadiness® PODCAST.

You can also get a FREE Exit Assessment HERE.

An Overlooked Risk in Management Buy-Outs

An often adopted exit strategy for a founder of a small business is to sell to a group of employees who have expressed a desire to be the future owners. Factors to be considered in assessing the viability of this strategy for the selling owner(s) include their personal financial goals, risk tolerance regarding payment of sale proceeds, and the buyers' capabilities to be successful business owners. Another risk factor most often neglected is whether the employees, who may be working well together, will succeed as business partners. It’s one thing to become a sole owner when you’ve never owned a business; it’s another when buying a business with partners. If they do not work out well as partners, the selling owner(s) may not receive the expected sale proceeds.

Following are common challenges inherent to a business partnership that should be thoroughly considered in assessing risk for the selling owner(s) as well as the critical employee buying group before a deal is ratified:

Differing Visions and Goals:

• Challenge: Partners may have different long-term goals for the business or personal ambitions that lead to disagreements about the company's direction.

• Impact: Conflicting visions can lead to indecision, confusion, and a lack of clear strategy, potentially stalling growth.

Unequal Work Contributions:

• Challenge: One partner may feel they are contributing more time, effort, or resources to the business than the other.

• Impact: This imbalance can create resentment, mainly if profits are split equally despite unequal contributions.

Financial Disagreements:

• Challenge: Partners may have different views on managing the company's finances, including how much to reinvest versus how much to take as profit.

• Impact: Disagreements on financial matters can lead to cash flow problems, missed opportunities, or one partner feeling financially shortchanged.

Profit Distribution Conflicts:

• Challenge: Even if partners contribute equally, disagreements over profit-sharing can arise, particularly if one partner feels their contributions are undervalued or not receiving fair compensation.

• Impact: Profit distribution disputes can strain relationships and damage the partnership over time.

Decision-Making Conflicts:

• Challenge: Partners may struggle to agree on critical business decisions, such as product development, marketing strategies, hiring, or expansion.

• Impact: These disputes can lead to delays in decision-making, reduced efficiency, and missed opportunities in the market.

Personal Relationships and Emotions:

• Challenge: Personal relationships can become intertwined with business decisions, making separating emotions from professional judgment difficult.

• Impact: Personal issues may spill over into the business, leading to emotional conflict, reduced productivity, and strained professional relationships.

Responsibility and Accountability:

• Challenge: Clarifying each partner's role and responsibilities can be difficult, especially in the early stages of a business.

• Impact: Without clearly defined roles, tasks may be neglected, or partners may duplicate efforts, leading to inefficiency or confusion.

Trust and Dependency Issues:

• Challenge: Partnerships rely heavily on trust, and if one partner acts unethically or irresponsibly, it can lead to a breakdown in trust.

• Impact: A lack of trust can lead to micromanagement, unnecessary oversight, or the dissolution of the partnership.

Exit Strategy Conflicts:

• Challenge: Partners may have different plans for exiting the business, whether through sale, retirement, or transition to new leadership.

• Impact: Without a clear exit strategy agreed upon in advance, disputes can arise when one partner wishes to leave or sell their share of the business.

Legal and Liability Issues:

• Challenge: In many partnerships, each partner may be personally liable for the business's actions and debts, which can pose a risk if one partner makes poor decisions.

• Impact: Personal liability can lead to financial strain, lawsuits, or bankruptcy if the business fails or a partner engages in risky behavior.

Communication Breakdowns:

• Challenge: Partners may fail to communicate business goals, issues, or concerns effectively.

• Impact: Poor communication can lead to misunderstandings, misaligned objectives, and unresolved conflicts, which may damage the partnership over time.

Cultural or Values Misalignment:

• Challenge: Partners may have different business ethics, customer service, or company culture approaches.

• Impact: A lack of shared values can lead to disagreements and difficulty in establishing a unified brand or company culture.

Decision-Making Paralysis:

• Challenge: In equal partnerships, both partners may need to agree on major decisions. If they consistently disagree, the business may experience decision-making paralysis.

• Impact: This can slow down the business's ability to respond to market changes, innovate, or capitalize on opportunities.

Growth and Scaling Challenges:

• Challenge: Partners may have different ideas about how fast the business should grow or how to manage growth.

• Impact: Misalignment in growth strategies can result in either overexpansion (leading to cash flow issues) or stagnation (leading to missed opportunities).

RISK Mitigation Strategy:

Partners can build a more harmonious and successful business relationship by proactively addressing these potential issues. To address these challenges, ENNIS Legacy Partners facilitates The Partnership Charter in our process for assisting an exiting owner(s) in deciding whether selling the key employees is the ideal route for exit. The process also serves the employees interested in purchasing the business to determine if they could be future business partners.

SCHEDULE A VIDEO CONFERENCE TO LEARN MORE ABOUT THE PARTNERSHIP CHARTER HERE.

Challenges Faced in Moving from Founder Mode to Manager Mode

Transitioning from founder mode to manager mode presents several challenges for small business owners as they plan for their eventual exit. Different leadership styles and approaches will be required as the business grows and moves from the start-up phase to a more mature stage. Here are some key challenges associated with this transition:

1. Letting Go of Control

• Challenge: Founders are used to being involved in every aspect of the business, from strategy to daily operations. Letting go of control and delegating responsibilities can be difficult, as they may feel no one else understands the business as well as they do.

• Impact: The reluctance to delegate can lead to micromanagement, slowing decision-making and growth. It can also create bottlenecks, as the founder becomes overwhelmed with too many tasks.

2. Shifting from Visionary to Operational Focus

• Challenge: Founders typically excel in setting a vision, driving innovation, and taking risks. However, manager mode requires focusing more on operations, process optimization, and day-to-day execution, which may be less exciting for visionaries.

• Impact: Founders may struggle to pay attention to detail, follow structured processes, or deal with routine tasks, which are crucial to managing a growing company. This shift from creativity to structured management can be frustrating.

3. Building and Leading a Structured Team

• Challenge: In founder mode, the team is often small, agile, and close-knit. As the company grows, roles must be formalized, a leadership team must be built, and clear organizational structures must be implemented.

• Impact: Founders may find it challenging to hire the right people for specialized roles, trust them to lead, and give up the hands-on approach. Moving from managing a few people to leading a large team with hierarchies requires different communication and leadership skills.

4. Process and System Implementation

• Challenge: Startups often thrive on flexibility and improvisation, with founders and employees solving problems as they arise. Creating consistent processes, implementing systems, and formalizing workflows in manager mode are necessary for scalability.

• Impact: Founders may resist implementing formal processes, viewing them as bureaucracy or fearing they will stifle creativity and agility. However, the company can experience inefficiencies, errors, and miscommunication without systems.

5. Balancing Innovation with Efficiency

• Challenge: In the early stages, the focus is often on experimentation and rapid growth. However, as the business matures, the emphasis shifts to sustaining and improving existing operations, which can slow down innovation.

• Impact: Founders may feel restricted by the need for stability and consistency, leading to frustration or the fear that the company is losing its edge. They must learn how to innovate within a more structured environment and balance exploration with exploitation of existing resources.

6. Changing Decision-Making Approach

• Challenge: Founders are often comfortable making fast, instinct-driven decisions, especially in a startup’s early, chaotic phase. However, manager mode requires a more data-driven, systematic approach to decision-making, with input from multiple stakeholders.

• Impact: This change in pace can be frustrating, as it may feel slow or bureaucratic. Founders may also find adjusting to consensus-building and decision-making processes involving multiple teams or departments difficult.

7. Evolving Leadership Style

• Challenge: In the startup phase, founders often lead by example, working alongside their small team and wearing many hats. In manager mode, leadership requires more delegation, coaching, and empowering others to make decisions.

• Impact: Founders may struggle to evolve from a hands-on leader to a coach and mentor. Some may find it difficult to trust others to lead parts of the business they once controlled, or they may lack experience managing at scale.

8. Cultural Shifts

• Challenge: As a company grows, its culture evolves. A startup's casual, entrepreneurial culture may give way to a more formal environment with policies, procedures, and defined roles.

• Impact: Founders may struggle to preserve the original culture while adapting to the needs of a larger, more structured organization. If this transition is not managed carefully, it could alienate early employees or create cultural friction.

9. Increased Accountability and Reporting

• Challenge: As a business scales, there is a greater need for accountability, both internally (to employees and managers) and externally (to investors, customers, and regulators). Regular reporting, budgeting, and performance tracking become critical.

• Impact: Founders may find these new demands tedious or at odds with their entrepreneurial spirit. Learning to appreciate and manage financial statements, compliance, and performance metrics is essential but often feels like a departure from the freedom they once had.

10. Adapting to a Slower Growth Rate

• Challenge: Growth can be rapid and exhilarating in the startup phase. However, as the business matures, growth typically slows, and the focus shifts from rapid expansion to sustainable profitability and market share maintenance.

• Impact: Founders may struggle with the psychological shift from chasing hyper-growth to being content with incremental improvements. This can lead to dissatisfaction or impatience, as they may feel the business has plateaued.

11. Navigating Investor or Board Expectations

• Challenge: In manager mode, founders often have to deal with external stakeholders like investors or a board of directors who expect regular updates, transparency, and a focus on profitability and governance.

• Impact: Founders may feel constrained by these expectations and struggle with the shift from independent decision-making to being accountable to others. The pressure to meet financial targets and adhere to corporate governance can be overwhelming.

12. Emotional and Psychological Shift

• Challenge: Moving from founder mode to manager mode often requires founders to redefine their role within the company, which can lead to an identity crisis. They may feel like they are no longer driving the company’s direction or being pushed out of what they built.

• Impact: This emotional transition can result in burnout, loss of motivation, or frustration. It can also cause tension between the founder and other managers or team members, especially if the founder resists stepping back.

How to Overcome These Challenges:

• Hire Experienced Managers: Bringing in professional managers with expertise in operations, finance, and HR can help bridge the gap between founder and manager modes.

• Delegate and Trust: Learning to delegate and trust the team is essential. Founders should focus on empowering others to take ownership of critical areas.

• Focus on the Big Picture: As the company matures, founders should focus on long-term strategy for growth and exit, vision, and leadership while letting managers handle day-to-day operations.

• Develop a New Leadership Style: Founders must evolve from hands-on involvement to coaching, mentoring, and strategic guidance.

• Accept the Need for Structure: Embrace the importance of processes, systems, and data-driven decision-making to ensure long-term sustainability and growth.

This transition can be difficult, but successful navigation allows the founder to play a pivotal role in scaling the business while adapting to the new challenges and opportunities that come with a more mature company.

We can help you overcome these founder challenges, strengthen your management team, and train and equip your successor(s). Contact us today for an exploratory conversation at email@ennislp.com or 301-859-0860.

"I'm Ready to Sell and Exit!" Really???

"I'm ready to sell and exit!" — a small business owner can arrive at that point in their thinking and emotions quickly and for many good reasons. Common reasons include retirement, health issues, a desire to do something else (e.g., travel with a spouse), or simply being burned out and tired of owning a business.

So, the business owner reaches out to a Business Broker to sell their business, but they may face some harsh realities. Even though they are "ready to sell," the Business Broker informs them that their business isn't ready to be sold as is, at least not for the $$$$ they need to get out of it. They learn that even though they have realized an excellent standard of living by doing "what seemed good" along the way, they've created a "lifestyle business" rather than building a business that would be of value to a viable buyer. It could take the Business Broker years to get interested buyers and close a sale that doesn't come close to seller expectations, wants, or needs.

Following are a few common characteristics of a lifestyle business that are not attractive to a viable buyer:

1. Dependence on the Owner:

   • The business relies heavily on the owner's skills, knowledge, and relationships, making it challenging to transfer smoothly to a new owner.

   • The owner is often involved in day-to-day operations, which can create a risk if the owner leaves.

2. Lack of Scalability:

   • The business may have limited growth potential and is designed to support the owner's lifestyle rather than expansion.

   • It may not have systems or processes to scale up operations quickly.

3. Limited Market Presence:

   • The business may serve a niche market with limited customer base, which can be unattractive to buyers looking for broader market appeal.

   • Often, it lacks strong brand recognition or market penetration.

4. Financial Stability:

   • Revenue and profits might need to be more consistent, often fluctuating based on the owner's efforts and involvement.

   • Limited reinvestment into the business for growth may lead to outdated equipment or technology.

5. Employee Structure:

   • The business might have a small team with limited delegation of responsibilities, which could lead to potential operational challenges during the transition.

   • Employees may have loyalty primarily to the owner rather than the business itself.

6. Documentation and Processes:

   • Poor documentation of business processes, customer lists, and operational procedures makes it difficult for a new owner to understand and run the business.

   • Often needs formalized business plans or strategic direction.

7. Customer Base:

   • Customer relationships may be informal and personal, heavily tied to the owner.

   • Often, a small, local customer base with limited long-term contracts or recurring revenue streams.

8. Financial Records:

   • Financial records may need to be better maintained or in a standard format, complicating due diligence for potential buyers.

   • Often needs audited financial statements or comprehensive financial reports.

9. Strategic Planning:

   • Business decisions may be based on the owner's preferences rather than market opportunities or strategic growth plans.

   • Often, it needs a long-term vision or strategic roadmap for future growth.

The story's moral is this: if you intend to HAVE AND EXIT WITH A LIFESTYLE BUSINESS, the characteristics above can be acceptable, especially if you've met your financial goals outside the business. That can be an effective exit plan if it is indeed planned. But you shouldn't expect to say, "I'm ready to exit!" and simultaneously wish to be in a position to sell your business as a business intentionally built to sell for value. A company built to sell takes years and should begin when it's launched.

If you’re in a situation where you have a lifestyle business, but need to have a business built to sell in order to exit successfully, we can help if you’re willing to invest time and finances in making it happen. Contact us at email@ennislp.com for an exploratory conversation.

You can also get a FREE Exit Assessment HERE.

Expensive Sentences and Your Business Exit

“It’s too late to turn back now.”  “We’re too swamped for that now.”  “We can probably do that ourselves.”  “It’s crazy busy around here.”  These are just a few examples of “expensive sentences” mentioned by my friend Jack Quarles in his book, Expensive Sentences, Debunking the Common Myths that Derail Decisions and Sabotage Success.

Jack explains in his book how conversations and discussions containing Expensive Sentences lead to decisions that impact the future of businesses, families, individuals, and nations.  How the faulty logic and false constraints of expensive sentences can lead to derailed and costly decisions.  He describes how conventional wisdom such as “You get what you pay for” or “We can’t change horses in mid-stream” can be a very costly and destructive trap.  Jack paints a picture as to how we can over time drift away from a disciplined analysis of a decision and instead be drawn by a “particular idea as if pulled by gravity.” 

When it comes to Exit Planning, or designing and implementing a plan to successfully and responsibly exit from a business, there is a seemingly endless supply of “expensive sentences”.

Such as:

“I’m not ready to exit yet…I will begin planning when I’m ready to exit “ 

“I am confident our business would be very attractive to a strategic or financial buyer”

“I know what my business is worth…I don’t need a valuation”

“I can sell my business for enough to live on for the rest of my life” 

“Yeah, I think we arranged it so that my spouse will get the business when I die” 

“I’m not worried about my employees leaving if I die…I have been good to them and they’re very loyal”

“One of my friends, who is in the same business, sold for $$$$...I’m sure I will be able to sell mine for at least that much”

“I don’t need a financial needs analysis.  I know about what we would need.”

“I am confident I can sell my business when I want or need to”

Business Owner Exit Planning employs a process requiring analysis that results in a strategy that will allow you to exit successfully and responsibly.  Avoid the costly and destructive trap of expensive exit planning sentences and begin the exit planning process today.

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.

How Can A Cash Balance Plan Help With My Exit Goals?

If your goal is to exit your business at some point in the next ten years, you should answer these questions as soon as possible:

• When in the next 10 years do I want to leave or exit?

• How much $$$$ will I need (net of taxes) to do everything I want to do after the business?

• To whom do I want to sell the business…third-party, insiders, children/family, ESOP?

• Is my business sellable? For how much?

• What is my plan for life after the business? (Most owners are miserable within two years of exit because they didn’t have a post-exit life plan).

You may decide to head down one of the following paths once you thoroughly answer these questions and others like them:

• Over the next ten years you decide to work hard to maximize the sellable value of your business (having a goal of selling for top dollar in the next 10 years), while at the same time accumulate as much $$$$ outside of the business as possible — in order to maximize your exit route options.

• After learning that you would need to invest much more time and money for your company to be sellable, and decide that you don’t have the energy for that, you might also decide that simply “closing the doors” and liquidating for asset value in 5 years will be your exit strategy — but in the meantime you will , “sock away” as much $$$$ as you can in savings and investments outside of the business.

• Maybe you have a professional practice (i.e, Attorney, Dentist, M.D., etc.) with neither a clear successor option or potential buyer, and you definitely want to exit within the next 5 years.

In all of these scenarios and others like them, where the owner wants to maximize savings outside of the business, a Cash Balance Retirement Plan could be an effective tool, if certain parameters are met, in accomplishing that objective.

A Cash Balance Plan is an IRS Qualified Retirement Plan that affords participants the ability to accumulate money for retirement in amounts well beyond the 401k and Profit Sharing contributions. If your comprehensive plan for exit includes maximum asset accumulation outside of the business, you should consider the pros and cons of a Cash Balance Plan and how it might serve in accomplishing your goals. If you need help contact us. You can also access further information by listening to Episode 29 of our ExitReadiness® PODCAST with guests Financial Advisor Erik Fromm and Retirement Specialist Les Risell of Janney Montgomery Scott.

Invest 15 minutes and take our exit readiness questionnaire. We do not ask for confidential information and you will receive a 12-page report scoring you in four key planning areas.

Aligning Exit and Life After The Business Goals with Business Growth Goals

Sarah thought she had a great sell strategy in place until it all blew up at the deal table. She was willing to stay on for a year or two and “earn-out” a percentage of the sale price, but she was not willing to play the role of a lender in the self-financing part of the deal, and she absolutely expected an offer of a higher sale price.

In building her business, Sarah was open to the idea of delegating core responsibilities to others but instead remained central to sales and operations. She was also much more focused on reducing her personal income taxes each year rather than improving the financial performance that would be stated on business financials. Sarah’s learning now that those goals didn’t align with maximizing a sale price or sourcing the types of buyers who wouldn’t require self-financing. When she gave any thought to life after the business, she pictured an immediate exit and drinking umbrella drinks on a beach in the Caribbean. But Sarah now knows that she and her business are not positioned to realize her dreams. At least not now when she was hoping to leave. Her goals for building were not aligned with goals for exit and life after the business.

• Life after the business goals can include things like financial security, time with the family, travel, health, and wellness, launching a new enterprise, or retirement on a beach in the Caribbean.

• Exit goals can include maximizing sale value, minimizing taxes, gratitude for employees, family harmony, or a successful transfer to children.

• Business goals can include growth and profitability, freedom, control, high income, building wealth and value, influence, or social impact.

To ensure success in your eventual exit it’s critical to continually examine your goals in each of these categories making sure they are aligned. It’s not unusual for an owner to be very disciplined and systematic in establishing and executing business goals, only to learn when it’s too late that those goals didn’t produce the exit they were hoping for. Whenever you set new goals for the business, ask yourself this question, “How do these goals for business growth align with my goals for exit and life after the business???”

In an effort to help business owners like Sarah be disciplined and systematic in doing this, we created our STRATEGY RENOVATION® Value Advisor engagement.

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

"I Don't Even Know Where The Life Insurance Policy Is!"

The spouse of a small business owner confided to my wife, “I don’t know what I’d do if something happened to my (business owner) husband.  I don’t even know where the life insurance policy is.”  That business owner has no business plan, and more importantly, no written exit plan - and his spouse knows it.

Sadly, this situation is all too common.  Most of us avoid thinking about the possibility of disability or even death.  The “tyranny of the urgent” – customer calls, product problems, financial pressures or a thousand other things – can crowd out genuine intentions for long term planning.  When the unexpected happens, as it all too often does, everyone suffers if proper safeguards are not in place.

Effective business planning allows for the unexpected.  It details how the business is organized, what and where the documentation is, and who should fill the owner’s position if he or she is unable to continue, even temporarily.  Exit planning goes several steps further.  Effective exit planning outlines how and when the business ownership will be transferred, or sold, to someone else.  It provides for appropriate business, tax, legal, financial, and estate planning.  Effective planning means everyone involved with the business knows what will happen next.

The experience of one client emphasizes why planning is critical.  (Names have been changed for privacy).  Tom, the owner, had built a successful multi-million-dollar business.  Lenore, his wife, had long expected that she would take over running the business if anything ever happened to Tom.  It was suggested that Lenore do a trial run.  She agreed to work full time, assisting Tom, for six months.  It wasn’t long before Lenore realized that not only did she not want to work at the business, she did not want to run it – ever! 

That was valuable information for Tom and Lenore.  They knew then that the Owner’s exit plan would not be for his spouse to ultimately own and run the business.

Not long after, Tom was unexpectedly hospitalized with a critical medical condition.  Because of his foresight and effective planning, Lenore only had to be concerned about her husband’s health.  The contingencies they had carefully planned for were covered.  Lenore did not find herself trying to run a business while caring for her husband at the same time.  Their financial needs were covered, and their children, employees, and customers were protected.

A Business Enterprise Institute survey revealed that only 38 percent of business owners think they have identified all the steps necessary to exit their business, and only eight percent had put those plans in writing.

Some questions every business owner should ask are, Would my spouse know what to do next if something happened to me tomorrow?  Do they know where the important documents are?  Would my family be financially protected?  Would my customers and employees be properly cared for? Would my business continue uninterrupted? Would I want it to and would my family need it to?

The demands on any business owner can be overwhelming, but putting off effective long-term planning can be disastrous.  Take steps now to cover tomorrow’s challenges.  The time will come when you will be glad you did.

Contact us today for an exploratory conversation about our STRATEGY RENOVATION® Exit Advisor engagement. Contact information: 301-859-0860 | email@ennislp.com.         

Align Key Employee Incentives With Your Goals For Building Value & Exit

Emily has been in business for 10 years and has plateaued in both revenue and profitability. Her exit planning advisor Mary has learned that she wants to exit in 5 years and how much $$$$ she will need net of taxes in order to exit successfully. An estimate of business value has revealed that her business is worth about 50% of what it will need to be worth for Emily to head off to Hawaii in 5 years in the way she wants to.

There are two employees that Emily would consider key (play a strategic role; unique talents and skills; to the success of the business; would experience harm to the business if they leave) to the success of the business. Currently the two key employees realize the same employee benefits (health insurance, 401k with match, year-end cash bonus) that all other employees are eligible for, yet they have higher salaries commensurate with their roles and responsibilities. There is NOT an incentive plan in place that would be specific in further motivating them (in their strategic roles) to grow either revenue or profitability.

One of Mary’s recommendations for maximizing the sellable value of the business that she emphasizes, is that Emily installs an incentive plan that aligns with her goals of increasing the sale price over the next five years. Emily’s response initially was, “Wouldn’t that be taking more $$ out my own pocket…why would I do that???” Mary describes the following basic elements and structure that serves in alleviating Emily’s astute question:

• Mary explains that the plan would need the following elements to be impactful:

  • The plan is in writing and specific.

  • The plan is performance-based.

  • The bonus is substantial.

  • The bonus serves in “handcuffing” the employee to the business.

• Emily sets a threshold for either revenue or profitability. For example, $500K in profitability.

• Emily creates a bonus pool of 30% of all profitability that exceeds the $500K threshold:

  • She informs the two key employees in writing how they would be rewarded for increasing the profitability of the business. The pool would be split 50/50 between the two key employees.

  • In the following year, an additional $300K (over the $500K threshold) is realized and a pool of $90K is established ($300K X 30% = $90K). Each key employee receives $45K in incentive compensation split between immediate cash or stock payments and deferred compensation.

So, Emily was quick to see how this plan would actually put more $$$$ in her pocket and her exit goals could be attained successfully as the value of the business would increase as profitability increased. And, she understood how it didn’t “take $$ out of her pocket”.

With Emily’s enthusiasm about implementing an incentive plan, Mary made sure they now had an expert on the exit planning team with extensive experience and expertise in stock and cash bonus plans and how they need to be designed and maintained to also meet all IRS/ERISA regulations.

If you want to increase the sellable value of your business, aligning the performance metrics of your key employees with your goals and implementing a well-designed incentive plan can be most impactful. Contact us if you’d like to discuss further: email@ennislp.com | 301-859-0860.

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.

Trust the Process of System Documentation

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.

With over 30 years of experience, Jason has witnessed firsthand the transformative power of systematizing business operations. His advice? "Trust the process."

During our conversation, he emphasized the importance of documenting systems comprehensively and likened it to crafting a playbook encapsulating every facet of your business, from customer interactions to backend processes. This documentation serves as a tangible asset, offering prospective buyers a transparent view of how the company functions efficiently and profitably.

But why does this matter? It's all about perception and value. Businesses with well-documented systems exude reliability and scalability, qualities that are immensely appealing to potential investors or buyers. When every operation is meticulously outlined, it instills confidence in a prospective buyer and mitigates risk, two factors that can significantly impact the valuation of a business.

Moreover, Jason highlighted the operational efficiencies that stem from system documentation. By streamlining processes and clearly defining roles and responsibilities, businesses can operate more smoothly, increasing productivity and profitability. This, in turn, enhances the industry's attractiveness to potential buyers who seek revenue streams and sustainable and scalable operations. He also pointed out that system documentation is not a one-time task but an ongoing endeavor. As businesses evolve, so too must their systems. Regular updates and refinements ensure that the playbook remains relevant and reflective of the current state of the company. It's a continuous improvement journey that pays dividends in the long run.

But how does one go about documenting systems effectively? It starts with a systematic approach. Strategically identify critical processes within your business and break them down into manageable steps. Document each step meticulously, leaving no room for ambiguity. Visual aids such as screen recordings or diagrams enhance clarity and comprehension. He also emphasized the importance of involving key stakeholders in the documentation process. Who better to provide insights into day-to-day operations than the individuals directly involved? By soliciting employee input at all levels, businesses can ensure that their systems documentation accurately reflects reality while fostering a sense of ownership and employee engagement.

In essence, Jason advises to "Trust the process of system documentation." It's not just a mundane task; it's an investment in the future value of your business. The sooner you start developing a company-wide culture of following best practices, the sooner you will have a safety net in case you need to sell your business during an emergency. So, roll up your sleeves and get to work following his proven methods. The value of your business depends on it.

A Succession Plan or an Exit Plan? Savvy Business Owners Need 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.

Get 15% off of our ExitReadiness® ACADEMY online exit roadmap course with videos and planning template using code BLOG10.

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.

Adopt A Scientific Approach To Planning Your Business Exit

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.”

In Part One: Individual Rethinking, Grant explains how we often assume the roles of Preacher, Prosecutor, or Politician rather than Scientist in a key decision-making process and how that is often detrimental. Grant describes the following cycles while recommending the RETHINKING CYCLE as a scientific approach:

THE OVERCONFIDENCE CYCLE: Pride > Conviction > Confirmation & Desirability Biases > Validation

THE RETHINKING CYCLE: Humility > Doubt > Curiosity > Discovery

We have found that owners planning for exit who adopt a scientific or “rethinking cycle” approach are much more likely to experience a successful transition out of their business. They indeed humbly realize and proclaim that “they don’t know what they don’t know” and engage help in discovering what they should do and how they should do it. They understand what’s at stake and have intentionally questioned or doubted their convictions and biases, and, with humility and curiosity, they seek knowledge and wisdom from others who can challenge their current thinking. As a result, the chances for a successful exit and the owner’s peace of mind are greatly increased. The opposite almost always proves true on some level for an owner who moves forward adopting “the overconfidence cycle”.

One of Grant’s recommended “Actions for Impact” is to “Build a challenge network, not just a support network.” For an owner planning their exit, this could include business owner peers who have already walked the exit walk, as well as an expert advisor team (those who know that the owner doesn’t) who could serve in challenging the owner’s assumptions, convictions, biases, while providing needed knowledge and insight.

In planning for the most significant event as a business owner, your inevitable exit from the business, you would be well-served in reading Mr. Grant’s book and adopting his proposed RETHINKING CYCLE. Please consider contacting us about playing a role on your “Challenge Network.”

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 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.

What Do I Need To Do Now If I Want To Exit My Business In 3 Years?

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:

• Assess Business Exit Readiness: Conduct a comprehensive assessment of your business to understand its current strengths, weaknesses, and areas for improvement. Review financial statements, operational processes, customer base, market position, and competitive landscape. Identify any areas that need attention or strategic adjustments to enhance the value and marketability of your business.

• Review your Personal Financial Plan: Create a plan that aligns with your exit timeline while considering your personal financial goals, desired sale price, and potential tax implications. Work with a financial advisor to determine the financial targets you must achieve before exiting the business and develop a strategy to maximize your business's value within the given timeframe.

• Strengthen Management and Key Employees: Identify and develop a strong management team capable of running the business in your absence. Invest in training and mentoring key employees to ensure they possess the necessary skills and knowledge to assume leadership roles.  

• Streamline Operations and Systems: Streamline operational processes and systems to increase efficiency, reduce costs, and improve overall performance. Identify areas where automation or technology upgrades can enhance productivity. Implement standard operating procedures and documentation to ensure continuity and ease the transition for a new owner or management team.

• Diversify and Expand Customer Base: Reduce dependency on a small number of key customers and diversify your customer base. Develop strategies to attract new customers and strengthen existing relationships. Focus on customer retention and satisfaction to enhance the perceived value of your business to potential buyers.

• Protect Intellectual Property and Assets: Review and protect your intellectual property rights, including trademarks, copyrights, patents, and trade secrets. Ensure that contracts and agreements with employees, suppliers, and business partners include appropriate confidentiality and non-compete clauses. Safeguard physical assets like property, equipment, and inventory to maintain value and appeal to buyers.

• Seek Expert Advice: Seek advice from professionals experienced in business exits and transactions, such as exit planners, attorneys, accountants, and investment bankers. They can guide you through the process and provide valuable insights to maximize the value of your business.

• Document and Organize Business Information: Organize and document critical business information, including financial records, contracts, licenses, permits, legal documents, and operational procedures. Ensure that all records are up-to-date, accurate, and easily accessible. This will facilitate the due diligence process and instill confidence in potential buyers.

• Prepare an Exit Strategy: Work with your advisors to develop a comprehensive exit strategy tailored to your goals and circumstances. Determine the most appropriate exit option for you, whether selling to a third party, passing the business to a family member or key employee, or pursuing a merger or acquisition. Outline the steps and timeline for executing your chosen exit strategy.

Remember, planning for a business exit takes time and careful consideration. By starting early and taking proactive steps, you increase your chances of achieving a successful transition and maximizing the value of your business. Regularly revisit and update your plan as you approach the exit date to ensure it remains aligned with your goals and the market conditions.

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.