Your Exit is Not Really an Exit: The Long Goodbye

Exiting your business is a process. It’s not an event.

We love to say: “It’s never too early or too late to start exit planning.”

Know this: You can start anytime, but the numbers don't lie: earlier is better.

Why is that?

As the world grows and shifts, there are a myriad of factors that contribute to the time you may need to remain tied to your business after the sale, delaying your planned transition to 9am tee times 3 days a week.

It might come as a surprise to you, but exiting well can take a lot longer than you might think.

Case Study #1: The Internal Sale

A business owner notified the next generation of his retirement. He was thrilled at the prospect of enjoying the fruits of his life’s work! It would be a tax efficient transfer that would be funded by a seller note over ten years.

So in this case, the seller was walking away physically, but financially he was very much still dependent on the business for another ten years. He thought this would be easy enough and that everything would go according to plan.

Over those years, the company went through its highs and lows. As the next generation struggled to lead the company through a variety of economic crises he was shocked to see that things didn’t go according to plan. To support the company, the seller had to make repeated financial accommodations, and was still owed a substantial sum of money when the sale hit the ten-year mark.

Yes, the owner had physically left the business, but he continued to be tied into the business in all other ways for over a decade. For most people, this partial separation might be a substantial roadblock to a stress free retirement.

Relaxing into the retirement sunset is something you should consider properly preparing for in order to enjoy it stress-free. 

Case Study #2: The External Sale

A client of ours was proactive about his exit plan. His energy was high, but he wanted to be fully out in 3-5 years. With no family transfer of the business under consideration, a sale to a third party was the necessary path to exit.

Rather than waiting another three years to sell, we decided after conducting some preliminary consulting work to move forward with the sale process right away.

Why? Private company investors today are investing in great teams more than anything. Most likely you, the seller, are your company’s key employee. This means that investor interest in your company will be linked to retaining your commitment to the company for some time period post-closing. In a lot of cases, they will not be an interested buyer unless you sign a multi-year employment deal.

In this case our plan worked out perfectly, as our client partnered with a great firm that backed him as CEO with the goal of transforming his business into a regional player in his industry. He will have to develop new skills to execute this strategy with his new partners, but by selling his majority interest before he’s running on empty, he has set himself up for a complete exit within his 3-5 year time frame. Thankfully, because we started the process early enough, our client was able to enjoy and savor his final years at the helm, rather than resent them.

Today is a Great Day to Get Started On Your Exit

You can never start thinking about your inevitable exit, too early.

There are many practices that you can undertake to better prepare for this certain future event. Perhaps it’s time for you to start considering your exit plan now? This way if a long goodbye is in your future, you’re in the driver's seat.

As an entrepreneur, you’ve predicted the future your whole career. Whether it’s forecasting your staffing levels, calculating your safety stocks, investing in equipment, or applying for an expanded line-of-credit; you have had no choice but to think a few steps ahead in order to keep your business running smoothly. In fact, it is your ability to predict that has largely enabled your business to survive and thrive in the market.

Given how good you’ve become at predicting, don’t you find it curious how little time you take to think about a certain event in your future: your exit from your business? 

Feel free to reach out to Doescher Group to learn more about how we can help you. Exiting your business typically involves more separations than expected: physical, financial, mental, and emotional. If you’re ready to find out where you stand, reach out to Doescher Group to learn more about how we can help you.