The Exit Checklist
The 5-Step Personal Action Plan for a Happy (and Lucrative) Exit From Your Business
If your goal is to diversify your portfolio, first analyze what percentage of your net worth you’re comfortable holding in your company’s stock, then estimate the market value of your business. With this information , you can back into how much of your business you should sell in a re-capitalization.
If you are bored with your business, you may want to sell your business quickly and be willing to take a discount. Before doing so, make sure you receive enough cash compensation for your business to cover what you’ve invested to date.
Step 4 – Decide What Role You Want to Play in Your Company in the Future.
Most business exits are gradual and rely on the owner’s continued involvement after the sale. Post-exit, you may be asked to play several roles with various potential paybacks:
- The Lender – Finance a portion of the sale.
- Earn Out – Serve as a senior leader within your acquiree’s company to help bridge the gap between ownership transfers.
- Consultant – Help the new owner in return for a pre-arranged consulting fee.
- Shareholder – While you sell some of your shares, you make be asked to hold a significant portion of equity in your business after the investor injects money into it. This may lead to you earning much more from the sale because you can sell the second part of your equity for a higher valuation.
Step 5 – Pick Your Spot on the Exit Matrix
Your final step to a happy and lucrative business exit is picking your spot on the Exit Matrix. Ask yourself:
- How important is it that you maximize the cash profits of a sale?
- How long are you willing to stay on post sale?
No one point on the Exit Matrix is better or worse than the other. In the end, the key to a happy and lucrative exit is to get clear on your priorities before starting the exit process.
Thinking of exiting your business? The first step is answering two important questions:
- Is your business ready for you to exit?
- Are you ready to exit?
Being able to answer these questions with a hearty “yes” puts you on the right track for a successful exit. Start by completing the Value Builder Scorer (https://bit.ly/ValueBuilderSystemScore) to determine if your business is ready to sell. Businesses with scores of 90+ double their value and receive double the offers than the average business’ score.
The next step is question #2: determining whether you as the business owner are ready to exit. This question can be difficult to answer, which underscores the importance of this five-step action plan to ensure a happy and lucrative exit from your business.
Step 1 – Get Clear on Why You’re Exiting.
There are likely reasons both pushing you away from your business and pulling you to something else. Push reasons are generally legitimate reasons to want to exit, while pull factors are thing you want to do after you leave your business
Typical Push Factors
- Reaching age of retirement
- Feeling you business has reached its peak
- Worry you have too much wealth invested in one asset
- Getting bored
- Experiencing a health issue
- Needing a break to reduce stress
Typical Pull Factors
- Travel the world
- Get fit and healthy
- Set up a charitable foundation
- Start a new business
- Spend more time with friends and family
The most successful departures happen when there are equal numbers of push and pull factors.
Step 2 – Align Your Exit with the Reason You’re Leaving.
There are. Several different ways to exit the day-to-day operations of your business. The most common exit types are:
- Sell Outright – The most typical exit strategy of selling 100% of your business to a third-party buyer and walking away.
- Re-Capitalization – Sell a portion of your equity while staying on and continuing with the business with a decreased portion of your equity in the company.
- Liquidation – Simply sell the hard assets of your business.
- COO / CEO – Hire a President or COO to take over running your business day-to-day, while you continue to be responsible for major strategic decisions.
- Chairperson – Retain all (or most) equity in your business while relinquishing almost all day-to-day responsibilities.
- Transfer to Family – Undertake a family transition where a family member(s) gradually takes over running your business.
- Management Buy-Out – With the knowledge of your business, managers can buy you out to acquire your business.
Step 3 – Figure Out Your Number.
The value of your company is dependent on the market yourself. The market valuation and your own personal valuation may not always align, so when they do coincide, it may be time to consider an exit.
If your goal in exiting your business is to retire, have enough investable assets to create the income stream you need to fund your retirement.