To Sell Or Not To Sell Is Not The Right Question: A Roadmap For Strategically Planning Your Most Important Business Decision
Last month, I received a noteworthy phone call from a former Vistage member. He'd relocated out of Atlanta, and months had passed since our last contact. He reached out to me to share a revelation.
"Larry," he said, "I regret selling my business."
Whoa!! I really was surprised and sorry to hear of my friend's regrets. We discussed his decision in-depth: his motivation for the sale, the fallout, and where he finds himself today. All business owners face the question of when and how to sell their business at some point. Here are some powerful tips I've both read and developed that can be used to approach this topic.
How Can We Avoid Making A Sale Decision We Regret?
As a business owner you need to determine early in your career what the exit strategy for the business is, and work it into your long-term plans.
If you have yet to decide when, and how, you will exit your business, let me share the insight of an expert on the subject, a fellow Vistage member and friend, Patrick Ungashick of White Horse Advisors.
In business, when selling, Patrick says, there are "innies, outties, passers and squeezers." These are the four ways to exit a business, and each requires careful, long-term planning:
- Innies: An owner who sells the business to someone that works for them already. This exit requires finding an employee, current or future, that is both willing and passionate enough to take the reins. They must have, or learn, the skills necessary to be a leader.
- Outties: The owner sells their company to an outsider. There are seven important areas of transferrable value that you need to take into account if you are planning to sell your company to an external party. I will address this topic in more depth in a subsequent posting.
- Passers: The owner passes the business to a person in their family. This exit strategy carries life-changing personal and familial implications you need to approach with substantial thought and care.
- Squeezers: Rather than selling, the owner decides to "squeeze" everything they can out of their business, then dismantle it at retirement and sell off any remaining assets.
There are no right or wrong exits to your business, as long as you've planned with the end in mind. Keep in mind; each option carries different tax implications, which should be discussed with a professional to ensure your plan is sound and truly in line with your goals.
3 Questions To Ask Yourself When Planning Your Exit
To decrease the risk of making a decision you will regret there are, at minimum, three questions to consider when planning your exit:
- What is the vision for my business?
- What are my lifestyle goals?
- What are the financial implications?
Is it a company vision? Is it a personal vision? Have I fulfilled it? Outgrown it? Can someone else take on this vision? Is "legacy" important to me?
How will my decision to sell affect my goals? Will I miss the "game" of business? (My friend does!) What will be my new lifestyle? When I exit my business, what am I going to do? Will I golf six days a week, go to the beach, or... buy another business?
Is there a certain financial return that would persuade me to sell, no matter what? Will the sale of the business truly allow me to be "financially independent?" Retirement is typically not the end game of a business owner; having the resources to do whatever you want is. Patrick calls this "Your Magic Number!"
Like every business owner, you will eventually have to ask yourself if it's the right time to exit. If you're operating strategically, the answer to this question should come easily. A clear exit strategy must be part of your long-term plan.