As we enter the new year, many of us are taking stock of where we are today and where we want to be a year from now, both professionally and personally. Even though so many of us are busy at this time simply getting caught up from projects delayed by the holidays, setting aside quality time to examine our priorities for the coming year can be extremely beneficial.
This is especially true for business owners. As our economy becomes more complex and interrelated, flying by the seat of our pants becomes riskier, and regular business planning is vital.
Although this applies to all aspects of your business (annually you should update your master business plan as well as your marketing, sales, HR, IT, and operations plans that feed into it), the most far-reaching, fundamental plan you can update each year is your exit plan. Your exit plan is usually the single biggest financial plan you will contemplate. Most likely you started your business on a shoestring and throughout the years with quite a bit of hard work, you have grown it into a much larger entity that is now worth a goodly sum.
Unfortunately far too many business owners delay their exit plans because they don’t want to face the inevitable: You are not getting any younger! And this is where one of the three legs of the exit planning stool comes into play (emotions) – here are the three components of any exit plan:
The first two are easier to plan for than the third. In fact in our next post on January 9, we will delve into those two components of exit planning since the last one listed, in many cases, becomes the biggest hurdle we have seen in actually closing a deal.
When we conduct our post-sale testimonial interviews, it is very interesting to hear about the process from the business owner’s perspective. As merger and acquisition advisors, our role is to guide the entrepreneur through all the components of a transaction from beginning to end. What we have learned throughout the years, and you hear it in our post-close testimonials, is that as the final hour of ownership draws near, the logical side of the brain that all along has been leading the process gives way to the emotional side of the mind, and a wave of feelings washes over the seller.
So you need to be prepared well in advance to encounter some of the following emotional responses as you get closer to selling:
These are just some of the emotions we encounter as we work with our clients. You need to take a look at this list and be ready for one or more of these to wash over you usually several times in the months preceding the deal closing.
Ultimately, the sale of any privately held company is completely different than the sale of a publicly held company. With a public firm, even with a limited number of outstanding shares, you have a board of directors typically making the decision based solely on financial and business issues. With a privately held company, especially one that has multiple family members involved, the logic of the decision is often battling with the emotions of the decision.
You need to prepare for this reality well in advance of the final weeks of negotiations. If your company has multiple owners, especially if they are all family members, you need to ensure that every owner has likewise considered the questions raised above. As logical as your deal may look on paper, you may be surprised at how some of these emotional questions become paramount when the goal line is in sight.
It is interesting to me – and if you take the time to listen to our clients’ post-close chats, you will hear it too – how often the final value offered was not the ultimate decision driver. In many cases our limited auction process will yield several buyers who are very interested in the company. As our clients spend time getting to know each one, more often than not the price being presented is topped by these phrases we hear from our clients:
Now you may look at this list today, months, or even years before you are going to exit and you probably are saying to yourself, “I would NEVER let such subjective issues impact my decision making process.”
Well I hate to tell you, more often than not, they do!
Again, in our next post we will examine the two more logical legs of the exit planning stool: how much you will need post-close and when you want to move on. We worked in reverse today because based on our experience and our post-transaction interviews, it is clear that private companies are made up of humans that, no matter how logical they may be, have feelings that transcend their lives outside of work and ultimately are part of the selling equation.
If you would like to learn more about exit planning, stay tuned for our next post where we will cover the remaining components. If this article has peeked your interest in finding out even more before then, or if you have personally felt some of these emotions as you have considered your exit plans, give us a call at 972-232-1121 or fill our a contact form and one of our M&A counselors can walk you through our process that helps business owners manage a balance between the logical and emotional sides of selling.
Carl Doerksen is the Director of Corporate Development at Generational Equity.
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We knew it would be a difficult task to have someone really understand our business and our market, prior to researching a possible buyer, so it was imperative that we found someone of your caliber, with definite proven experience in this area.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
Thanks again Phil and feel free to have a future client call me if they would like a referral. You are a true professional!Andy Graham, Vice President, Modern Heating & Plumbing
Greetings Mike. Thank you for the captivating and compelling presentation you made at the Phoenix presentation last week. Over many years in business yours was the most informative and well-presented presentation, on any subject, that I have ever attended! Your energy and enthusiasm combined with your concise and captivating support of your positions with easily understood examples and data was compelling.Pete L.
I quickly recognized that Don was working for Sharpe Mixers above all else, and held our interests above others.Jay Dinnison, Owner of Sharpe Mixers
Dear Chris and Andre, I just wanted to say thanks for all your help. Even though this process was not an easy one, it was comforting to know that I had a capable team standing beside me. You made me feel like we were almost your only client or at least the most important one. Thanks again, and I will recommend your service in the future.Shenille Engelhart, Owner – CLS Technology
I need to say an immense thank you to Don Ho for his stellar work ethic, attention to detail, and tireless effort. Also thank you to the whole crew at GE! Without you, Don could not do such a phenomenal job. We were shooting for closing and funding before the end of 2020, due to the uncertainty of the political landscape and taxes. I am happy to report we closed last week and will be funding tomorrow.Dr. Caty J. Catron PhD, RN, VA-BC – Owner, Vic The Picc, LLC
I couldn’t have asked for a better team than Michael and Deborah. We couldn’t have done it without them.Robert Evans, President and CEO of Mealtracker Dietary Software
The process was much more involved than I expected and your help, experience and advice was a big factor in making the negotiations go as smoothly as possible.Terry D. Wickman, President, Keytroller
Tom Staszak is one of the most professional people I have dealt with in my last forty years of business. You’ve got a great group of people and you have built a truly professional organization.Michael J Polarek, President, Paragon Packaging
We thank you Eric and Generational Equity making our dream come true.Larry Moore, Owner, A Company Portable Restrooms
Your wisdom and experience were invaluable to me during this once-in-a-lifetime transaction.Ralph Noblin, President of Noblin & Associates
I am pleased that I was able to work with Andrew Byrd throughout this experience. From the first meeting we had in Minneapolis I felt that I was in good hands. His knowledge and expertise is second to none. He guided the process consistently throughout. I feel lucky that I was pared with Andrew and could not be happier that I chose Generational Equity to handle this major life event. Thank you Andrew and GenEq for everything!Eric Erlandson, Owner, Action Fastenings, Inc.
Generational Equity educated and informed us – so that we could be on the upside of a good decision (to sell).Bil MacLeslie, CEO, ipHouse
I would like to thank you and your firm, Generational Equity, for being our valued advisors in our journey.Bil MacLeslie, CEO, ipHouse
We will highly recommend Generational Equity and Musa Jagne to any business owner about to embark on the same process.Karen S. Williams, CFO, BW Manufacturing
Michael worked tirelessly, He followed every lead meticulously and urgently to make sure nothing was missed.Robert Evans, President and CEO of Mealtracker Dietary Software
Thank you again for all your guidance and support. Any company will achieve what they intend, if they have you on their team!Rick Nowak, President/CEO, Kurz Electric Solutions, Inc.
We are extremely pleased with the way Generational Equity handled the sale of our company. Your associates, Tom and Chris, did an outstanding job of getting us (me) through the process.Michael J Polarek, President, Paragon Packaging
We were happy to see the interest in our company and what we cherished has not just a valuable company but an important company to the communities we served in.Larry Moore, Owner, A Company Portable Restrooms
Bruce and I wanted to take this opportunity to thank Generational Equity for assigning Musa Jagne to our transaction. In Bruce’s words, “Musa did one hell of a job for us!”Karen S. Williams, CFO, BW Manufacturing
Generational Equity’s assistance was invaluable in compiling and marketing our business.Bil MacLeslie, CEO, ipHouse
I must say that I have never worked with a more driven, competent and focused individual as Don Ho.Jay Dinnison, Owner of Sharpe Mixers
I wanted to write you a quick letter to express our appreciation and our delight on the outcome of helping us through the process of our recent sale. We are very happy with the end result, and are very happy to be able to move forward with all of our future growth plans.Terry D. Wickman, President, Keytroller
T.D., thank you so much! You are a great leader! I love how you are using your gifts and talents to better others. You are clearly a GREAT COACH! This 3 day session undoubtedly changed the future of our business, and very well may have been the sole catalyst to save my company, my health and my marriage! A genuine “thank you” from the bottom of my heart.Bryan D. Horn, Owner, Over Under Clothing
The help you provided us during each step of this process made us feel very comfortable and confident we were selecting the right approach to transition our Company.Andy Graham, Vice President, Modern Heating & Plumbing
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