InSight

Exit and Growth Strategies for Middle Market Businesses

It’s Always Something in Exit Planning

By Jim Gerberman | Feb 23, 2015

Exit PlanningThe recent production of “Saturday Night Live 40th Anniversary Special” brings back some great memories of the original “Not Ready for Prime Time Players” and the creativity that they and the SNL writers brought into our homes in those early years of the show. And, the stories that we would later share about “Killer Bees”, “Coneheads”, “Samurai” and the like became a routine part of our culture. I have a particular favorite character – introduced by Gilda Radner (rest in peace) in the form of Roseanne Roseannadanna…and her catch-phrase “It’s Always Something”.

Many of us can relate to the challenge of overcoming inertia…of going against the grain. This is particularly true when dealing with a subject that is rather easy to put off or that is rather difficult to address. The subject of “exit planning” is one such subject for many business owners. Accordingly, some questions.

Firstly: Why is exit planning hard to do? For the most part, the daily life of a business owner is dealing with things that are urgent and demand our immediate attention. It’s natural for these to get precedence. The discipline required to effectively address exit planning (or any planning, for that matter) necessitates putting a number of these “urgent items” into proper perspective and giving priority to those that are truly important. In his classic book The 7 Habits of Highly Effective People, Steven Covey called this “Putting First Things First”. Otherwise, as Roseanne Roseannadanna would say: “It’s Always Something”.

Secondly: Why is exit planning important? When properly done, the actions implemented in the exit planning process build value in your business. Value is created by improving processes and by reducing or mitigating elements of risk. Our firm has direct and tangible evidence of two similar firms- recently sold within 30 days of each other, whereby the valuation differed significantly. One firm was sold at a multiple of 5 – the other at 3. The primary difference was the relative readiness of the more valued firm for a transaction. This readiness (as well as the un-readiness of the other firm) had a direct impact on the buyers’ perceived risk…and the resultant value that they reflected in their offer.

And, thirdly: How can we best overcome the associated inertia? Too often business owners see exit planning as a monumental task. While it is true that effective planning entails substantial time and effort, there are a couple of ways to make this a more manageable task. One way is to make the elements of exit planning part of your routine as a business owner. Another way is to retain an advisor whose expertise can be helpful in both establishing the routine and taking part of the task so that you’re not in the position of trading off your time between the planning process and running your business.

Many of our principals at Corporate Finance Associates have operations experience having run businesses of their own. We’d love to work with you – way before your decide to sell your business, in order to identify and implement ways to optimize your result. You’d be surprised to find that the level of your effort required to implement a few actions is not that great when compared with the impact that these actions will have on the value of your business. If you’ve already recognized this and are on the path to building value…good for you. You’re ahead of most of your peers. If that’s the case, then I’ll quote another Gilda Radner character, Emily Litella, who says: “Nevermind”.

Posted by Jim Gerberman.

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