Exit Stage Right
If you are a business owner, it is 100% guaranteed that you will exit your business at some point in time. Some business owners set the stage for a horizontal exit. In fact, “exit” is a four-letter word. They have no plans to leave their business, let alone transition control to anyone else. Most business owners, however, prefer a better approach. They want to “exit stage right.”
The phrase “exit stage right” comes from theater scripts. It’s the playwright’s way of giving clear directions for a character to leave the stage. Some define it as: “To exit or disappear in a quiet, non-dramatic fashion, making way for more interesting events” or as “An orderly and uneventful departure, timed so as not to detract or distract.” From my experience, that is exactly what most business owners want.
However, big questions loom large. “How do I do it?” and “When should I start?” are the two questions I hear most often.
[Related: An Unsolicited Offer to Buy: Is It Time?]
“How” to exit a business? The answer is an unwavering, “It depends.” This is a personal decision for an owner. Period. You may include your business partner, spouse, and/or family in the conversations, but ultimately it comes down to what you want and need out of it.
Issues of legacy, community, employees, customers, next-generation opportunities, and cash are just the tip of the iceberg. You’ll want to balance these issues with what you can afford. What comes next in your life factors into your alternatives and optimal exit plan.
There are no cookie-cutter answers. Understand and explore all the options with the support of an experienced team. Only then can you craft the “how” that best meets your needs.
“When should I start my exit planning?” This question usually comes up when someone is starting to think about it, but would rather kick the can down the road another day (or year) or two.
My answer is, “Today is a good day.”
Most owners react by saying that they aren’t ready to exit today, which is precisely my point. They aren’t ready. What If something happened today that forced you to sell the business? Would your business be ready to go on the market? Could someone else step right in and run it? Would it attract the best price the market could deliver at the time?
Doubtful. This is particularly true if the company is too dependent on you or a single customer or vendor. Who has all the key relationships? Who makes all the decisions? Is the understanding of how things get done residing between just one set of ears? If that’s the case, when you leave, so does the value of your business. Potential buyers will walk away faster than they go through the Starbucks drive-through for a caramel latte.
Approximately half of all business transitions are forced. One of the “Five D’s” – death, disability, divorce, disagreement, or distress – strikes and control over the timing of the transition is lost. Then, there isn’t the luxury of time to fix the business and get top dollar.
It is what it is. Money is left on the table, assuming the business can be sold at all. It’s a fire drill. People get hurt at a time when there’s likely already enough stress in life. We all understand that one never knows when one of these demons will call. Smart owners prepare for this.
They commit to understanding not only what makes the company money, but also what creates value in the business. Every day. From its inception, a business should “always be for sale.” Your exit planning isn’t an event; it’s your lifelong commitment to solid business strategy and sustainability. It's your commitment to yourself and your family that you're "taking care of business."
Is it time for you to make that commitment, write your own script, and create your own “exit stage right?” Today is a good day!
Martha Sullivan's career has wound many curves, from a budding Information Systems graduate, to consulting in a CPA firm, to controller and CFO positions, and then back to consulting. She has always been committed to helping others accomplish their goals.
Have more questions? Follow up with the expert herself.
Partner, Business Transition Strategies Group
Honkamp Krueger & Co., P.C.
"Oh the places you will go..." My career has taken me through many curves along a path from a budding Information Systems graduate, to consulting in a CPA firm and then controller and CFO positions then back in consulting. The common theme along this path has been helping others accomplish their goals. Specifically business owners, who shoulder many challenges alone and need a solid advisor whom they can trust to keep their confidences while helping them... Continue Reading
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