Are you between the age of 45 and 55? Have you owned your business for 15 to 30 years? Is your personal net worth tied to the value of the business as a going concern? Does your company enjoy a strong reputation in your industry and in your community? Have you received inquiries from buyers? Have you investigated the exit-planning process and all that it entails?
The answers to those questions will help you to build your “seller profile.” They answer “the who” part of the equation. But it is more important to know “the why” of deciding to exit your business. In an earlier article, I talked about “the how” fact that there are 34 ways to exit your business. For practical purposes however, we can reduce that number to just a few — sell, give, liquidate. But now, let’s take a look at why owners tell us they want to exit their business.
When we reach a certain point in our business and personal lives, we may start to feel that our energy bucket has a little leak in it. Vince Lombardi said that, “fatigue makes cowards of us all.” I think he probably meant that when we get tired we don’t want to take as many chances or that our risk tolerance is at low ebb. Fatigue can rob us of the willingness to take on new competition, or fight through another economic down cycle. It doesn’t mean that all we want to do is sit around or take naps. Quite the opposite, in fact. We probably are looking to re-direct our activities from the business to our avocations or maybe even to a new business.
We hear from owners that it may be time to take some chips off the table. We have a mantra in our firm that you must be financially independent of your business or striving to get there. It’s a lot easier to roll the dice with the economy or new competition or needed credit for growth when you are secure in the fact that you can retire when and how you want. Many times, the owners who want to take some chips off the table are less than financially prepared and are hedging their bets. This is an important situation — maybe the most important — to solve.
What if it’s time to take the company to the next level but the debt or equity that is required is just too much? Many times that comes coupled with a management team that may have grown stale or feels frustrated that we, as owners, will not pull the trigger. Either way, it is a strong reason why owners want to exit their business. If family is involved in the business, and hasn’t the skill or desire to grow the business, may also dictate your exit plans.
How about spousal pressure? How many times have you heard recently that your spouse is asking you to take more time, be more relaxed, and enjoy the fruits of your labor a little more? It is a powerful influence. The best answer for this “why” is that you have a well-drawn plan with the right people in the right seats on the bus and your financial house in order. This pressure may go along with health issues or other family issues. In any event, it is a strong reason owners give us for why they wish to exit their business.
The single best way to handle all the above “whys” is to have an exit plan. A plan that will include all of your personal and business goals, an awareness of your company’s worth, a knowledge of all of your exit scenarios, and methods of protecting your wealth.
Bruce Grieshaber is a certified business exit consultant and senior consultant at Grenell Consulting Group, specializing solely on exit planning. Contact him at email@example.com