In the world of business, the journey doesn’t end with the inception; it’s crucial to plan the exit just as meticulously. In the first article of this series, “The Exit Trap,” we delved into the necessity of preparing your business for a strategic exit and introduced the 21 Steps designed to guide business owners through this complex process. Today, we embark on Step 1 – clarifying your goals and outcomes.
Understanding the Terminology: Succession vs. Exit
Before diving into the intricacies of business exit planning, it’s essential to distinguish between succession and exit. Succession involves transitioning from working ‘in’ your business to overseeing it ‘on’ a broader scale. On the other hand, exit marks the point where you depart from the business or shift away from equity ownership.
Setting the Destination
The journey begins by envisioning your desired outcomes. What’s your timeline, and what activities do you foresee post-implementation of your exit plan? While the idea of sipping pina coladas on a beach may initially sound appealing, it’s often insufficient. We explore how to fill newfound time in a way that excites and fulfills you, ensuring a satisfying post-exit life.
Motivation Through Clarity
Knowing the destination is crucial for motivation. Whether it’s succession or exit planning, clarity on the end goal is paramount. Numerous exit deals crumble due to last-minute changes, often stemming from a loss of identity and uncertainty about the future. The desire to maximise valuation, leave a legacy, or care for employees are common themes, but every owner wants to leave on their terms, avoiding convoluted earn-out periods.
The Magic Number
Every business owner has a magic number in mind for their exit – the amount they wish to sell their business for. Understanding this number is key to gauging its proximity to a realistic market valuation. Whether it’s a personal sense of achievement, retirement needs, or an arbitrary figure, this number shapes the foundation of the exit plan.
Consideration of Risk Profile
Beyond the magic number, the risk profile of the owners plays a pivotal role in shaping the exit plan. This insight helps evaluate the feasibility of the plan and allows for necessary adjustments to meet expectations. As Stephen Covey wisely stated, “Begin with the end in mind” – and that’s precisely the purpose of Step 1.
Looking Ahead
Now armed with a clear understanding of the end point, we transition to Step 2 – the Fact Find. In the next article, we’ll delve into the importance of gathering information that defines the starting point. Stay tuned as we continue our journey through the 21 Steps, navigating the complexities of business exit planning.
