Exit planning: A tough topic to get exactly right

I’m blessed to have a terrific business network, and just about every week I have the great pleasure of meeting and greeting with entrepreneurs at various stages of of their business life cycles.

Some are earnest startups working hard — and with passion — to grow a new service or product. Others are second-stage company leaders working hard to overcome a revenue or other business plateau. And still others are in the work wind-down/retirement planning years of their life as entrepreneurs.

All of these stages can be scary, exhilarating, and filled with lots of other emotions in between. Arguably, the retirement stage is among the hardest because it is often counter to the entrepreneur’s raw personality type and/or inherent personal passion.

Successful exit planning — the kind that is kind to the pocketbook and the many people and relationships involved — comes down to the proper alignment of a couple of key factors, points out Jack DiFranco, managing director at Rochester-based BeaconView Advisors. These are: Market environment, company health and the alignment of key owners/shareholders (the sellers.) For example, if there are three primary owners and only one wants to sell, it’s never going to work.

From DiFranco’s point of view, we are approaching the tail end of an economic cycle where all three drivers (environment, company health, sellers’ interest) can be in alignment if the circumstances are right. So that means a company owner just starting to think about all the moving pieces (what a sale could mean to company succession planning, what a sale could mean for his or her family’s net worth, or what a transition could mean to real estate or other decisions that are in the offing) might want to get educated. It’s the perfect time, as DiFranco points out, to “take the temperature” on whether a sale or other transaction could make sense.

It’s not a question that you can answer overnight. But there are proven ways to quickly evaluate both pragmatic and emotional concerns. Here’s a practical example: A Tier 2 auto supplier is run by a visionary founder. But that founder is close to retirement age and has come to the conclusion that his son or daughter doesn’t have the chops to run the business.

Enter an adviser like DiFranco or his colleague John Lankford. Lankford and DiFranco don’t have a formal business relationship but they have complementary strengths. Lankford is a certified business advisor with  Premier Executive Forums and a results-oriented executive coach.  DiFranco is an expert in the various forms of M&A transactions or recapitalizations. Lankford focuses on helping organizations develop plans and accountability and tracking systems to ensure leadership development is on track. These skills can come in handy whether a company is getting ready for a sale or a leadership change or just wants to button up its structure and systems.

“One of the critical factors of any transition plan is quality of your leadership team. Leadership talent is an integral part of any successful organization and a huge factor in succession planning,” said Lankford. ” In Jim Collins’ newest research book “How the Mighty Fall,” he documents key indicators of how you can predict companies that will lead their industry. He mentions that one predictor is how organizations transition leadership or who fail to groom leaders from within”. Building a great leadership team now, will increase profits this year, while adding value to your exit plan.” (Post continued below.)1

An ownership transition and strategic deep dive can be a great opportunity for personal growth for all involved. It can also be a nightmare if you move too fast, too slow or don’t consider some key opportunities and risks. After speaking with Lankford and DiFranco about some of their client war stories, I decided to write this blog to help raise awareness around the importance of approaching this career crossroads with care and thought.

If you enjoyed this blog and it resonates with you or someone you know, consider sending them this information about a free breakfast event coming up March 30 that will highlight the do’s and don’ts of #exitplanning. Doing it the right way can be the best decision of a career. Doing it wrong can be the worst. http://mibusinessevents.com/


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