Timing An Exit
Finally, I would be remiss if I did not discuss the important aspect of timing regarding business exits. Most companies will miss out on an optimal exit by not investing the time to create a strategic and implementable exit plan, not allotting for sufficient time horizon for a company to be at the optimal point of growth to exit, and not allocating sufficient time to identify and negotiate with the right buyer.
Why do I bring this up? After all, an exit means an end of the road for business owners in its current configuration. It normally does. If you have set and met certain business growth objectives, perhaps it is the best strategy to follow both for management and the long-term health and viability of the company. Exits should not be viewed as negative events. With advanced and proper planning, they can be leveraged to consolidate profits and move on to the next big idea.
In my work as a certified business exit planner, my focus was always on the strategic aspects and not the mechanics, such as accounting or legal negotiations. Because from my perspective, the strategic component takes time to develop and implement and puts the company in control of the timing of its exit. It requires thinking backwards and looking forward.
Rarely will a company outlast its current ownership before it is either sold, merged with another company, or go out of business. The number of family businesses that survive even a first to second-generation transition is small. Second to third-generation handovers are even rarer. Third generation to the fourth succeeds at a rate of only 3 percent, at most. For the third and fourth generation, transition time and business history are not on their side. It’s probably best to exit, reap the rewards, and move on.
It’s no different from any other major business initiative, product, or service. They all have a certain lifespan before market forces impose a change. Perhaps the original objectives have been met. They all are exits, and therefore the same principles apply.
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