It is super easy for entrepreneurial organizations of any size to get lost in the weeds. There are marketing strategies to execute, bills to pay, inventories to sort, new products or services to launch, policies to create, books to oversee, and clients/vendors to meet. And if you are not busy enough doing all of that, then there is always a business plan to rewrite!
A friend of mine in the eCommerce space, Joe Valley, wrote a fantastic book, the “EXITPRENEUR’S Playbook, How To Sell Your Online Business for Top Dollar By Reverse Engineering Your Pathway to Success.” (email me at [email protected] and I will send you a copy).
Joe is a noted business broker who helps entrepreneurs successfully exit. Our goals are the same: if we take on a client, every step we take is to maximize the value of the business. The challenges are the same also: what is done (or not done) can’t change, we can spin the weakness or try and retrofit a solution. But a business buyer generally will look at that weakness and use it to devalue your company. It is just the game.
Exitpreneurs maximize business value by always thinking about the exit strategy at every stage of the business. If you sold the business now what are the strengths, weaknesses, opportunities, and threats that a business buyer would see with your business at this time? How can we accentuate the strengths and emphasize the opportunities while minimizing the weaknesses and threats?
In my world, here are some things that I see entrepreneurs do that are not EXITPRENEURIAL:
Failure to think out intellectual property strategy (brand protection/TM, copyright of marketing materials)
- Poorly written co-founder/partner agreements
- Poorly drafted vendor and/or customer contracts
- Failure to make a big deal of the trade secret/competitive advantage
- Poor tax strategy/planning did not comply with state and local tax considerations
- Ignoring international counterfeit issues
- Poor stock/unit structuring
- Lack of a competitive analysis
- Cut and paste website policies/ignorance of privacy laws
In summary, all of this stuff doesn’t grow the business in and of itself; it provides the foundation of the business that sellers demand to see. Nor is creating an Exitpreneurial legal framework sexy. It also isn’t particularly expensive or time-consuming either.
You can blow my Exitpreneurial advice off, but if you wait until the end, you will most likely not have maximized your value and may not have all the best cards to play during the M&A process. This generally means you will need to leave lots of money on the table while making the M&A process painful while the legal bills rack up.
My job as business/IP counsel is to essentially groom your company for success. I would like to start as early as I can and train you to be a successful Exitpreneur!
The strategy that works for your business may not be the same as one that works for any other business. Because of the personalized nature of building an exit strategy, working with a small business attorney with experience in developing succession and exit strategies is a good idea. A solid plan should be in place when the time comes for someone else to take the reins or sell your business. Waiting to develop a strategy until it’s time to sell or transfer your small business can compromise the entire process.
Creating an Exit Strategy that Works
Selling a company often takes months or even an entire year, so timing is an important factor in every exit strategy. If you know when you plan on leaving your business, you can use this to develop your plan. However, getting a head start ensures you have the time to properly plan for whatever you decide is the best option for your business.
Is developing an exit strategy in advance the best plan for your small business? While it’s true that the conditions of your business will most likely change over time, having the framework in place for your exit is preferable. If, down the road, your needs or wishes change, you can adapt your plan accordingly. Any future adjustments you want to make will be more straightforward if you already have a strategy to work off of. Additionally, you may need an existing plan if unforeseen circumstances lead to an earlier exit than anticipated.
Building a plan for your eventual departure or turnover of your business takes considerable research and planning. Small business owners will want to consider numerous factors, including marketing, employee management, and new leadership.
EmergeCounsel can help you set clear goals for a successful sale or transfer if you are ready to create an exit strategy for your business. Contact us today to schedule a free consultation with one of our skilled attorneys.