Every business is an organic entity with monthly and even weekly changes effecting value and potentially the selling decision. Changes in sales, inventory, customers coming and going, changing regulations and employee movement can only be controlled and predictable to a point. For that reason, exit planning needs to be a flexible process.
Some events like a recession or loss of a primary customer could require prolonged shelving of a plan to focus on survival.
Why to Create An Exit Strategy Business Plan
One element you would assume would be a constant is the beneficiary of the exit strategy business plan, the business owner. Quite often the Owner/Seller is conflicted by a number of factors. Factors other than money and risk.
The after sale afterlife is one that can’t be ignored.
Carl & Bob Hammer are the 2nd generation owners of Hammer Supply. A small regional building materials retailer. Their parents founded the company over 70 years ago and the brothers took it over in their early forties.
Now in their 60s and at the urging of their spouses, they were referred to us by their CPA to perform an exit strategy Business Plan.
The company was very solid and well capitalized and they also owned the Real Estate with additional growth capability.
Even though the brothers had different skillsets and management styles, one hands-on and the other in the background, they alternated management duties in 6 month intervals. 6 months on and 6 months off.
The sale would provide a very comfortable retirement for the Sellers as well as their next generation.
All were excited to move forward and we were green lighted to prepare to go to market.
But over 2 years went by as the Exit Plan went from delay to delay. Copious vacations, computer upgrades, supplier changes, delayed appraisals…… Almost every month it was another reason not to go to market.
The brothers were so set in their routine and lifestyle that even with much encouragement they didn’t invest any time or effort in planning for the next stage in their life.
A Disaster Without A Business Exit Plan Can Result In Distressed Sale
In the 3rd year Disaster strikes……. one of the brothers, the hands-on manager, quickly passed away from a re-occurring illness leaving the other brother to handle all facets of the ongoing business as well as all family matters.
Almost immediately the business started to show indications of decline. It was all hands on deck to market the company before it would be considered a distressed sale.
Fortunately, we found an excellent fit and even though there was a small reduction in price all went well.
The take away from the above is: All elements of an exit plan including the after sale need to be managed with equal diligence. Transition360 provides quarterly educational events to prepare business owners on the steps needed to start an exit strategy business plan.