At a dinner party over the weekend my wife mentioned that one of the things she wanted to do was travel across the U.S. by train. In between the main course and dessert, a few others also weighed in with what might be categorized as "bucket list" goals. One of mine is now to travel across the U.S. by train.
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.