The Exit Strategy™

Clearly written business goals provide a blueprint for where an organization is going and helps guide decision making along the way.  This same goal development should occur with the most important decision every business owner will make; how and when to transition from your business.  For most business owners your business is your largest single asset.  One you are dependent upon for ongoing revenue as well as retirement.  So you must manage your business to achieve the highest business value possible.  Thus, when it is finally time to implement your exit strategy, you are prepared to act.

B2B CFO® partners are prepared to assist business owners to determine the goals they want to achieve with their business succession.  This may include selling your business or it may mean a smooth transition to the next generation.  There are many paths this transition may take but all of them start with a clear idea of what you, the owner, want to accomplish.

Once you have established your goals, the process can begin to help you to find the best exit, no matter what the actual time frame may be.  The process begins with an understanding of where your business is today, and where you need it to be when you execute your exit strategy.  This gap analysis helps you to understand exactly what you need to accomplish during the next phase of the business.  A  B2B CFO® partner will help you develop a plan to manage the value of your business.  We call this process, Finding the Exit ™.  There are six distinct forms in which to exit your business.  The form that is right for you is dependent upon your goals, the industry you are in, your company size and profitability.  The greater the value of the company the more options you have available to you.

A business being prepared for transition is similar to getting a house ready for sale.  In some cases a fresh coat of paint will suffice.  In other cases parts may need to be replaced, the furnace cleaned, or the leaking roof finally fixed.  Making these changes now will add value when the transaction occurs.

The true value of your business is highest when the business is stable, profitable and the level of risk is low.  Part of the plan will be to increase your revenue, reduce your expenses, grow your business, collect your receivables and control your inventory.  A balance sheet showing quality assets, reasonable debt and positive retained earnings is the goal.

Do you know all the risks that face your business?  How financially solid are your key customers?  What percentage of sales, are with your largest five customers?  Where are you in the life cycle of your largest or most profitable product?  Are your expenses in line with others in your industry?  Are your mission critical software applications up to date and secure?  How much obsolescence is in your inventory value?  Are your collection efforts achieving the desired outcome?  Are your employees appropriately compensated?  Will they stay if you sell the business?  Do you have non-compete agreements in place with your key employees?  Are there buy-sell agreements in place with minority owners?  Do you have long term deferred compensation plans in place for your key employees to motivate them to stay after the transition has occurred?

The Exit Strategy™ developed by our partners takes these and many other variables into consideration when designing the plan to help you maximize the value of your business. They will explore the question of just how important are you to the ongoing operation of the business?   Are you a Finder, or a Minder? Does your management team make the primary decisions or do you?  Who has the relationship with your key customers or suppliers?  Often an exit plan is about making it possible for the business owner to transition out of the day to day operations of the business. The greatest business valuation will come from a business that can operate autonomously from its owner.

The Exit Strategy™ will develop a detailed list of initiatives and tasks to be accomplished over the designated time frame.  There will be a series of follow up meetings scheduled to monitor progress toward your goal.  You will always be aware of where you are in the process.  Ultimately the decision about exiting your business is yours.  You may make it yourself or it may be made for you by events outside your control.  It may bring great financial reward, or it may bring financial devastation.  It may bring joy to you and your family or sorrow.  Your exit may be a benefit or a detriment to your competitors.

To end well, you need to plan well.  There are many resources available to assist you on this journey.  The book, Avoiding The Danger Zone, Business Illusions by Jerry L. Mills, CPA is a good place to start and at B2B CFO® we are ready when you are to begin the journey.