I spend a fair amount of time hanging around with people who are trying to or at least think they’ve developed a new planning mechanism for private business owners. The name that has been coined and pretty much adopted is Exit Planning.
My understanding of Exit Planning is that a business owner will sit down with an advisor and figure out what they want to do three to ten years in the future as it relates to them leaving their business. The reason the time frame is usually so long is because there is almost always things that need to be done before a “successful” exit happens.
My question around Exit Planning is why do it in the first place? If you want to exit your business, then start going down that road today. If there are other things that need to be done first, then do them. The real important thing is that you should always have your business be in a saleable format at all times. Those who do, have the most options. Those that don’t will take what they get, and that often isn’t very good.
Here are some of the sillier things I see around Exit Planning:
Planning for something that is going to happen more than three years in the future. It’s hard enough for us to plan around what’s going to happen in the next year, much less three or more years from now. The world keeps changing and what’s true today might not be true tomorrow.
If you need to fix your business, get to it. This is not Exit Planning. If there are structural weaknesses in your business, fix them. This isn’t exit planning, this is making your business better for whatever scenario you work under. Exit planners probably are not the best people to work with in solving this issue if it exists.
Going through a fake due diligence process could be a very good idea. But, once again, this is not exit planning. The fake due diligence process will help you identify weaknesses in your business that you can fix. Once this is done, then thinking about an exit might be a good thing to do, or you might just decide to change your relationship with your business.
If you’re exit planning, you likely are not focusing on the right thing. If you’re planning for an exit more than twelve months from now, you’re focusing on incorrect things in your business. You would be better off focusing on areas that can improve your business and or your life. Planning for something that isn’t likely to happen for a long-time just doesn’t make much sense to me.
I’m not opposed to strategic planning, and in many ways, this is what exit planning is. Becoming strategically and operationally excellent with a recurring revenue stream is something a successor owner will be excited about. At the same time, working on these issues is hard enough without having to decide what is the best way to exit a business. What do you think? Please contact me at Jpatrick@stage2planning.com. I’m interested in hearing your ideas.
I know this is a strange offer based on the above post, but we have a complementary Exit Planning Assessment to assess the 18 key areas a buyer would look at in your business. You will have a call with no charge as well as a report that outlines a projected value of your business, the gap you could fill and strong and weak parts of your business. This assessment and report just might help you stay out of the need to do an earnout when you sell your business. Click on the button below to start the Exit Planning Assessment process.