Creating options for successful exit

All business owners dream of exiting their business. The timeframe for the occurrence of this dream tends to differ from one owner to the next. For some, it is before the business exists. For others it is the result of conversations with other business owners who have managed to ‘realise the value’ of their businesses. For those remaining, it is normally the result of years of draining hard work and the desire to create a different, alternative life – quite frequently labelled ‘retirement’ – not that they actually go on to retire!

Whilst the dream is enticing, the reality of exiting the business is a somewhat difference experience.

Imagine, that you have worked your whole life to develop something then all of a sudden the moment comes, the sale is agreed and the business is no longer yours. You feel a sense of achievement, a moment of relief, but the business still feels like yours.

The new owners arrive. You may have an earn-out clause as part of the deal or, you may just be keeping in touch with the people in the business. Very soon, you start to feel “a real sense of loss”, “guilty that I’ve let the people in the business down”, “annoyed that the new owners want me to report on my business progress” or, “regretful that the new owners are destroying the very business I’ve spent my life creating”.

Eventually, the owner leaves the business fully, with a sense of remorse, a sense of unfinished business and a sense of bewilderment that results in some serious soul searching – “what do I do next?”. Frequently, they go on to invest their new found wealth in fresh ventures or younger, more energetic, ambitious entrepreneurs.

Meanwhile, on the other side of the fence, the new owner of the business is often left wondering “how am I going to realise value from this business”, “the people have too much loyalty to the owner”, “the owner is becoming an obstacle to growing the business”, “can’t they see the potential for growth that we can?” and, “there are a few more problems here than we realised”. Soon the ‘fixers’ descend upon the business and implement the ways of the new world, casting aside all reminders of the past. People leave. Those who remain hanker after ‘the good old days’.

Of course, all business sales are not the same. Not all have the same drivers. Not all have the same business model. Not all have the same personalities involved. Not all are extremely felt as those described above. However, those that go better than others do seem to have some consistent themes:

• It allows the owner to realise an appropriate amount of value
• Selling the business better allows the business to fulfil its founding principles – it is the right time to sell
• Time is spent co-creating a new future for the business
• The original identity of the business is nurtured and evolved rather than destroyed
• Time is spent on engaging people in both businesses during and after the acquisition
• The integration is viewed from a long-term perspective
• The seller plays an important role in the transition of leadership
• The original owner is supported in discovering a new role/life for themselves

Given this, some important questions to ask might be:

• What type of ownership/leadership does your business now require to fulfil its purpose?
• Rather than investing in them when you have sold, how might your business benefit from bringing in fresh entrepreneurial energy now?
• What are your criteria for an ‘ideal buyer’?
• What would you actually do if you left your business? No really, what would you DO?
• How will you ensure you maintain ambition and drive during an earn-out period?
• How would you avoid developing sense of seller’s remorse?
• What would you do to work with the new owners to nurture and evolve the identity of the business?
• How would you work with the new owners to create a new direction and future for the business (in a way that you couldn’t do before)?
• How would you support the people in the business ahead of/during the sale so that they could be successful in the new organisation?
• What role will you play in the transition of leadership?

Compass meeting # 4 – creating options for successful exit