Why Business Owners rarely plan their exits – Making a change where to start

Our guest blog post this week comes from Dave Shapiro, CEO of Excell Puget Sound.

Yesterday, I sat down with a business owner who is working way too hard (his experience) and who saw no way out.  His own conclusion, after a number of questions from me, was that he needed about five more of himself, because his team were not used to running the company (inexperienced) and did not have anything objective by which they are measured.

We broke the problem down in to smaller and smaller chunks until he offered, “I guess in three months we could begin tracking Key Performance Indicators for each of the departments.  We weren’t quite done and, now that he was offering solutions rather than excuses, we quickly came up with a first step…. define what you want to measure and achieve.

So, this business owner will, over the next 30 days, draft ten Key Performance Indicators (KPI’s), two per department.  While this is a large project, it is one he feels he can get done in a stated period of time, without sacrificing the other work he has to do.  We agreed that at our next consultation, we will create a timeline that will include a set of action items, the constituencies (employees, customers, vendors); who will play a role what the roles/actions will be over time and how those players can be invited to participate.

Now, the only difference between this budding project, which will end with my client operating a more valuable company, and an exit plan is the length of time it will take to execute.  Most Business Owners I work with put off longer plans because they say they are too busy running their companies.

Creating an exit plan and executing that plan has a horizon of more than a few months.  Where to start is pretty simple, figure out what you want from exiting your company.  When you have a dollar figure begin looking at whether your company can address/provide you with that figure.

This stops most people…. because, frankly, they either don’t want to face the reality/gap between what they want from the sale/transfer of their company and what the company will actually fetch… Or.. they think they know and don’t want to hear the facts.  In either case, living in hope tends to be the preferred state.

A simple set of questions can help… Who do I know who can give me an objective appraisal of my company’s value (yes, there are ways to get a decent evaluation without having to pay for it).  Why get a third party to give you their opinion?  Because it is very likely that you are in love.  Most business owners are not detached when it comes to viewing their company’s value.

Ask yourself what would you pay for your company if you were buying it today and had all the knowledge you do about the company, employees and industry? All the warts?  Put values or simply pluses and minuses next to each of the following: Revenue, profit, ability to run without me, cost of hiring a GM to run the company, debt, etc. In other words, do due diligence on your own company and then ask yourself to value the strengths and weaknesses.

Taking first steps and setting a number of days to complete these first two steps will help you begin developing a plan that will help you achieve your goals for exiting your company.  What is more, executing such a plan will likely be spot on toward sustainably growing your company and will likely tie in to your annual plans.

Do you have to wait till there is smoke or fire before you take action on an issue that will take more than a couple of months? What gets you motivated to do longer range projects?