At Exit Consulting Group, we measure our success by our ability to help clients identify and achieve their personal exit success. The “win” is different for every owner. The sale price is only one component of a rewarding exit. In other words, it’s not just about the money—not for the business owner looking to leverage what they’ve built to start a new chapter in life, and certainly not for us as the professionals committed to helping them do just that. In the spirit of self-reflection for a new year ahead, here’s a look at our wins this year. Respect for client privacy reigns supreme at ECG so what follows are “just the facts”.
Third Party Sales
Selling a company to a third party is a phenomenal achievement. It takes focus, grit, perseverance and, of course, a salable business.
One of our owners had a rough go in 2017 trying to sell their business themselves. So, we stepped in, looked from a buyer’s perspective and showed them where there were some concerns. We brought back some suggestions to improve the business prior to taking it to market and how to run the company as if it would never sell. They evaluated our recommendations and together we worked for 6 months getting the business ready for market. 2018 brought huge success. The owner stuck with the process, plowed through the paperwork, and produced a banner year for sales. We sold at a higher price, faster and with fewer headaches.
In this case – as in most cases – success stemmed from preparation. Most business brokers that you meet just want to list your business as is and park it on the market. The average business broker may close only 20 to 30 percent of their listings; we’re proud to be at 78 percent and attribute that success to the way we educate owners on what to expect and, if necessary, how to improve before we take their business to market.
Many owners envision selling their business to someone they know and trust, such as a key employee or family member. While that person may “know the business” it is usually only from an operational perspective. This type of transition is often much more challenging than the parties expect. There’s a huge difference between being an employee—even an executive—and running the company.
One of our owners assumed they would sell to a key employee. We encouraged him to evaluate several options, including a third party sale and an employee stock ownership plan (ESOP). After working with him and his wife on their personal objectives and what they wanted their legacy to be, we determined what he was really looking for in his exit and an ESOP became the obvious choice. This enabled him to fulfill his goal of turning over the company to his management team and see his legacy continue with familiar faces and lifelong friends while benefiting from some significant tax advantages. These tax benefits allowed the owner to be repaid sooner. Meanwhile, the senior managers were incentivized to run the company with the same pride and passion that the owner had poured into it for so many years.
There is positivity to be found in inherently negative situations. When partners in a business decide they want to go separate ways, the business is left in a vulnerable state. Add to this challenge several partners, possibly family member or multi-generational partners, and the problems can multiply quickly. Successful exits in this split up are often not defined by just money but debts, future liabilities, non-competes and relationships. We had a number of clients this year with multiple business partners where one wanted to move out. As in most personal divorces, this came as a surprise or a blessing. Determining the value of a business post partnership split up is challenging but working independently, honestly, fairly and professionally, we were able to gain the trust necessary to find a solution that met everyone’s needs. It’s a very difficult challenge and it requires buy in from all partners, but it’s very rewarding when we can help owners through this difficult situation.
Poise in the Face of Adversity
It’s a horrible thing when a business owner dies unexpectedly. In the midst of grief, the surviving family must also figure out what they’re going to do with the business, which is all the more difficult if the owner did not have a plan in place. The spouse is left to decide whether to liquidate, sell or keep the business. While the tendency is often to sell, we have recently worked with several surviving spouses of late business owners to enable them to hold on to their respective companies and maximize their value. We establish processes, hire the right people, and position the business for a better sale later. The key to this exit plan is to work closely with the Trust Attorney, CPA, Financial Planner, and Real Estate professionals to consider all options. It is a great feeling to help a surviving handle the business side of the estate, so they can focus on family during this extremely difficult time.
All of these examples began with defining a goal, persevering to achieve it and realizing immense gratification in the end.
To all of our owners: We enjoy the opportunity to work with you and deeply value your trust. Here’s to a great year together – thank you!
Is 2019 your year to become one of our success stories? The first step is to contact us.