When Will Business Owners Take Exit Planning Seriously?

My last posting mentioned that there are a lot of businesses out there that will be coming on the market in the next few years and not many owners who are doing anything constructive to plan for a successful and lucrative outcome. Many owners seem to have their heads in the sand, or simply not the time available to put some thought into what options exist out there to exit their business and what tactics are then required.

By way of comparison I have met two business owners recently going through the exit process, but with very different stories. Both are true stories, but I have changed names to protect their identities.

Owner A (let's call him Jim) owns a small plastic injection moulding business. He has owned it for more than 20 years and is aged in his early 60’s. In recent times it has gone backwards a bit and his original business partner has pulled out, leaving Jim as sole owner. The facilities look tired, but the machines are in good condition. No long term contracts are in place from customers, but they do receive regular orders due to their high quality reputation. Jim still owes a significant amount to the bank for the purchase of one of the injection machines, secured on his private home. The business is in leased premises.

Jim wants to exit the business and due to no long term plan in place is looking at the most likely scenario of selling the machines, shutting the doors and walking away from the business, still owing money to the bank. Not much of a retirement to look forward to.

Contrast this with owner B (Lets call him John). John has owned an optometrist practice, for about 15 years. It started as a sole practice, but it grew to employ another optometrist, originally shared with another practice. About 8 years ago John realized that one day he wanted out of the business and to follow his passion for travel and geology with his wife. A couple of years after that he needed to hire a new optometrist graduate and was lucky enough to hire Sally. When John broached the idea of Sally buying into the business, she was enthusiastic and a plan was put in place. A new company was formed with both Sally and John as shareholders. A shareholders agreement was thrashed out and a share valuation conducted. Over the next 5 years Sally has slowly invested her drawings into buying John’s shareholding and within the next couple of months this process will be completed and John leaves on the first of what he hopes will be many trips overseas with his wife.

Which outcome do you want for your business and your life? Putting some longer term planning in place will help you achieve a successful exit from your business, or at least maximise the chance of a successful exit happening.

Join me in a 2 hour workshop in Albany on March 3 to start this process off and start planning what you will do when your exit plan has been successfully executed. Register by emailing me at andyburrows@iconbusinesssolutions.com Tickets are $49 +gst per business.