You are reading: Exit Planning: Great Business Strategy by Another Name

Sam Walters

Vice President (Client Relationships)

For too many owners of closely held firms, exit planning is seen as a task for a later date. Business owners are too busy focusing on more pertinent tasks than to think about life after business. How can the business owner concentrate on exiting in the future when there are so many fires to deal with? This is a framing that is not only patently false but damaging to the firm in its present form.

The truth is that the steps that improve the prospects of a successful exit are the same steps that reduce the fires on which management spends so much time. Nobody wants a firm that’s susceptible to spontaneous combustion. Improved business strategy and, more importantly, execution on that strategy not only increases the exit process but makes life better for owners, management, and the firm’s customer base in the present.

A lot of the literature in the exit planning space wholly supports the relationship that “poor management” is translatable to “poor exit planning.” Neglecting the duties considered standard blocking and tackling not only practically ensures a failed exit, regardless of when attempted, but it also puts the company at greater risk of failure in the present term.

So often our affiliated advisors uncover business plans without documentation, let alone plans that are periodically updated. The more you support that you have the team in place to tackle challenges that come before you, the more you prove to would-be buyers that you have not only a business that can be managed but the team in place.

Proper documentation of the firm’s vision, mid-, and long-term plans naturally cascade throughout the business in ways that increase the company’s success and future value. Employees have a better understanding of what is expected of them for the company to succeed, lending itself to foster more of an owner’s mindset throughout the firm. This sense of empowerment spreads, and often more impactful solutions to lingering challenges are developed at all levels of the team.

Investing in processes and systems designed to mitigate the creation of fires decreases long-term risks, improves customer relationships, and can improve the quality of the bottom line. And it also improves the attractiveness from potential buyers. The more owners can design these processes to remove ownership from the system itself, the more valuable the firm will become, and the more likely strategic buyers will be willing to increase the multiple for which they purchase.

But for the proper exit to coalesce, owners can’t stop with executing the business plan. Similar to the rigor with which owners must put into de-risking their firm, so too must they engage in planning and de-risking their personal affairs. Research shows that the highly personal process of planning for the next stage of one’s journey to be a particularly strong impediment to a rewarding exit.

As an advisor, you must guide this process of discovery for your client. How much capital is required to fulfill her goals? Has she thought with the detail that she displayed while growing her firm the past thirty years?

These discussion points are just the tip of the iceberg, clearly, but they can help prepare the client and the advisor for more detailed work as you build trust in each other and develop the plan for a greater business strategy and more fulfilling exit.

Subscribe to receive the latest updates from Capitaliz.

Fields marked with * are required.
This field is for validation purposes and should be left unchanged.