by David Shavzin
Business Exit Structure is the fourth high-level step I discuss when speaking on succession/exit planning.
My last three blogs covered the first three steps: Step 1: Exit Planning / Succession Planning is a TEAM SPORT; Step 2: Knowing Your Business Value; Step 3: Building Transferable Value. The fourth step, Business Exit Structure, comes in many flavors.
How Can I Leave Thee – Let Me Count the Ways
It is not simply a matter of handing over the business and getting a check for the full amount on your way to the islands for the rest of your life. Despite what you hear, it rarely happens that way. It may be a payout over time, the amount may be tied to future revenue targets, it may require your continued involvement for a period of time.
You may simply not be ready to accept offers that are put in front of you, requiring you to stay in the business longer than you would like.
A few options to consider for your business exit structure:
• Sell to a 3rd Party: An investor or someone looking for a business to run and grow.
• Sell to Family: Could be ideal, could be complex and personally challenging!
• Sell to Employees: Current staff knows the business, employees keep their jobs.
• New Employee/Acquirer: Bring someone in, teach the business, agree to sell at a certain date.
• Retain Ownership: Sell majority ownership, but keep an income stream over time.
• Shut the Doors: Liquidate, perhaps the only choice due to a crisis or lack of planning.
• Strategic Sale: Find a competitor who may pay more because of various cost savings.
• The Two-Step: Merge with a competitor as a first step and have a plan for a buyout over time.
• Split in Two: Don’t want to completely retire? Is there a product or service you enjoy and would want to keep?
• Die – No Really!: Want to work forever? Ok, but you still need to plan.
The Bottom Line on Business Exit Structure
There are dozens of formulas for business exit structure. Start planning early, build your advisory team and outline at least a target exit scenario so you have something to work toward. Discuss the pros and cons of each possible scenario. You can always adjust along the way, but having an initial plan will help bring you and your team together toward common goals.
A successful transition takes time. The earlier you start, the more flexibility and negotiating power you will have for your business exit structure.
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More Reading:
Step 1: Exit Planning / Succession Planning is a TEAM SPORT
Step 2: Knowing Your Business Value
Step 3: Building Transferable Value
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David Shavzin, CMC
Shavzin and Associates, Inc.
Valuation, Succession / Exit Planning, Building Value for Sale
Atlanta, Georgia
770-329-5224
dshavzin@shavzinassociates.com
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