Business owners share a secret and seductive fantasy Late at night after emails have stopped it whispers to business owners: "One day you will make a decision to sell the business and you will quickly put it up for sale, the buyer of your dreams will then appear, write you a BIG check and it will be a HUGE success".
Sadly, this exit plan fantasy often transforms into a nightmare of lost dreams and destroyed wealth. In reality, successful business exits & successions are years in the making and have at least 4 distinct phases.
The strategic phase is all about getting the business ready for sale. Think of this phase like getting a your house ready to sell. In so doing the owner is attempting to strategically invest time and money into the right things so that a buyer pays a premium over and above what was invested. In a business this can be investment in new IT, documenting systems and processes, preparing staff, and shoring up the customer base to evidence ongoing revenue streams.
Execution is what is most often thought about when discussing exits. This is the relatively short, but intense process that involves the actual transaction(s). Think pricing, bidding, attorneys, accountants, due diligence, questions, answers and finally a signature on the bottom line and money in your pocket.
Transition is about the owner. An owner has had a truly successful exit when he or she is able to move on to a phase of life filled with significance and purpose.
We give credit here to Bo Burlingham for crystallizing these exit stages in his poignant and timely book, “Finish Big”. His book is based on extensive interviews with post exit business owners. The insights he gleans and stories he shares are a valuable resource for all business owners, particularly those who are considering exit.
Exploratory is the most often overlooked phase. This is a place of discovery and introspection. Key questions include: What do I want? What is important and what is not? What are the different ways I can approach this? Who do I need to involve? What dollar amount am I looking for?
This phase takes time and forms the foundation by which the other phases are successfully completed. Sitting across from a potential buyer is not the moment to suddenly start considering what you want for your employees or your own role post execution.
Entrepreneurs who take the time for serious reflection must often confront aspects of their identity that they didn’t know they had locked off. There are hidden uncertainties and fears that must be confronted such as: “How do I measure up?” “Who am I if I am not successfully running this business.” Such mental barriers can cause the owner to avoid this tension and go back to the relative safety of running the business and dealing with the tyranny of the urgent resulting in yet another delay to the important work of planning for transition.
Thus, when the execution phase is thrust upon the business owner (be it by choice or by circumstance) there is a much higher potential for self-sabotage leading to the destruction of wealth and legacy. An ill-prepared owner who is pushed through the execution phase will inevitably become a fundamentally unsatisfied former owner. In fact, according to a PriceWaterhouseCoopers study of more than 300 business owners, 75% of them regretted the sale of their business within 12-months of the close of sale.
The bottom line: an owner’s readiness is the most salient predictor of both exit and transition success. So, it makes sense that we would start by understanding the owner’s current readiness. Our personal readiness online assessment tool is a simple but powerful means of determining just how ready you are to tackle the transition process. This research based tool can be completed in approximately 5-7 minutes and it provides you an instant score and report as to how ready you are to engage the exit process.