EXIT PLANNING IS GOOD BUSINESS STRATEGY

---

Most business owners have never sold a business and they get one chance to do it right.  Exit planning is about preparing today to achieve better outcomes tomorrow. It requires aligning personal, financial, and business decisions with a clear understanding of how strategic and operational choices will affect a future exit.  Owners who build businesses that are resilient, transferable, and attractive to buyers materially improve their chances of a successful result.

The data is sobering:

• 73% of business owners will transition in the next ten years.
• Nearly half of those transitions are unplanned, triggered by death, divorce, disagreement, disability, or distress, the “5 Ds.”
• Only 20-30% of business owners will complete the sale of their business.
• 75% of these owners regret their decision to sell one year later. Only 5% are satisfied with the net proceeds.
• For most owners, approximately 80% of family wealth is tied up in the business.
• Also consider that buyers, investors and bankers will typically look at two to three+ years of financial history. That can not be created overnight.

(Exit Planning Institute)

Most valuations are based on a multiple of adjusted earnings (R/EBITDA, SDE).  Consider the numbers:

• $10 of earnings at a 3× multiple equals a value of $30.
• Increasing earnings from $10 to $11 and value rises modestly to $33.
• However, increasing earnings and the multiple from 3× to 4× raises value to $44.

Exit planning creates value by reducing risk and increasing buyer confidence, which ultimately drives higher multiples and valuation.

A company's four intangible capitals, its human, structural, customer and social capitals, typically contribute to 80% of its value: 

• Human Capital: The skills, experience, motivation, talent, and depth of your employees and management team, including their ability to operate the business without the owner.
• Social Capital: The strength of your company's culture, values, reputation, and relationships with employees, suppliers, and the community, fostering loyalty and smooth operations.
• Customer Capital: The loyalty, diversification, and strength of relationships with your customer base, including recurring revenue streams and strong customer satisfaction.
• Structural Capital: The systems, processes, documentation, technology, intellectual property, and strategic framework that enable the business to run efficiently and independently of the owner. 

Many strong exit opportunities are lost when owners are not personally or financially prepared.  Will the business sale provide the necessary wealth?  What will the owner do next after many years of running the busines?  What is the legacy?  Focus fades, financial gaps are realized, or fear takes over. Other owners complete a sale only to later realize the outcome could have been significantly better. While every exit is influenced by both logic and emotion, the greatest advantage to achieving a strong result is deliberate planning. 

Exit planning is not extra work.  The good news is that building a sellable business strengthens day-to-day operations and mitigates risks to the owner.  It improves performance, resilience, and sustainability today.

So, start early!  Schedule an initial call.