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Oct 4, 2016

Prepare For The Unexpected With Exit Planning

Sponsored Content provided by Dallas Romanowski - Managing Partner, Cornerstone Business Advisors

In preparing for battle, I have always found that plans are useless but planning is indispensable. - Dwight D. Eisenhower

Gen. Eisenhower’s point was that the process of creating a plan provides value because it forces the planner to consider - and make provisions for – the question, What if events don’t proceed as planned?

A plan not only provides context and the basis for adapting to new and unanticipated events, it also offers alternatives based on assumptions about goals, objectives and resources that may need revision.

As advisors, we know business owners who create plans are able to react more quickly to new events than can those without.

Unfortunately, even prepared owners fly without plans, co-pilots or maps as guides when storms force them to alter course toward their business exits. If an unanticipated event arises, such as a significant change in the national economy, they shelve their exit planning thinking (and thinking may be all they have in the absence of a written plan) because their only option is to wait for conditions to stabilize or improve.

These successful owners would never consider a similar passive response to be acceptable in a business plan.

If the value of an exit plan isn’t already obvious, let’s look at a few cold, hard facts.

First, you are far from the only fish in the sea. As the wave of Baby Boomers (those born between 1946-64) reaching and passing retirement age crests, the departures of those who own businesses could result in a glut of companies for sale, driving down valuations and giving new leverage to buyers. 

Simply put, it may become a buyer’s market, and sellers such as yourself may be forced to accept less-than-ideal prices or terms for the sale of your business.

Second, if you are a Baby Boomer, the generation following you is not nearly as large, so expect far more sellers than buyers in the marketplace. This too, adds to the glut.

Third, even during boom times not all owners who want to sell their business are actually able to sell. There is quite a lot of variation, even among similarly sized businesses in the same industry.

Differentiating factors become magnified and elements that were not that important while you were growing your business can become glaring deficiencies. You need a clear competitive advantage to grow, thrive and ultimately exit on your preferred terms.

Fourth, if your exit strategy is to wait for an ideal time to exit - such as when buyers are active or markets are good - you give up control of the timing of your exit, how much payment you’ll receive, the terms of that payment and even the type of buyer.

Are you confident that the next boom cycle in your industry or in the overall economy will appear when you need it?

Your reason for putting “exit plan” at the bottom of your to-do list because you believe that, until the economy or your business improves to a certain level, your time and money are better spent preserving and growing business value. But understand that working to create a valuable company is an integral part of any successful exit plan.

So why not start - or move the ball forward - now?

The benefits of exit planning include:

  • Advanced preparation for a successful future for you, your business and your family.
  • Control over the timing and terms of your exit.
  • Customized solutions and action steps tailored to your exit objectives.
  • Laser focus on the value-building aspects of the business that buyers seek and successor owners need.
  • Time-sensitive accountability for each action necessary to build value and position the business for the next owner.
  • Benchmark changes in business value, management team performance and other critical factors
Concentrating your effort today on growing business value - either as a discrete project or as part of a comprehensive exit plan - affects both your ability to sell your company and the price you will be paid. In fact, your value-building plan will be inseparable from your exit plan.

The bottom line is that the process of planning is what we mean by working on, not just working in, your business. The planning process is the only method to set up the best opportunity for exiting your business on your own terms despite the glut of sellers, dearth of buyers, vagaries of the market and investment world, and the myriad of known and unknown influences on your business.

You can start planning today by working through a narrowly focused set of top priorities or by attacking all aspects of the future of your ownership as a comprehensive process. It’s your choice. Starting a planning process that systematically addresses the unique issues relevant to you and your company positions you to impact your future.

We’d like to talk with you about your goals and how exit planning might impact those goals.
The Cornerstone team includes former C-Level executives, successful entrepreneurs and advisers who offer unmatched experience in delivering advanced, custom-tailored, results-oriented solutions for business leaders. As a member of the Business Enterprise Institute (BEI), Cornerstone is an authorized distributor of BEI’s content and Exit Planning Tools. We developed the Performance Culture System™ to help clients implement best practices and drive high performance throughout their organization. For more information, visit, call (910) 681-1420 or email [email protected].Posts

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