Your Business is an Investment

You have learned the importance of treating your business as an investment. Now, it is time to understand how to turn that knowledge into a strategy. The end game is to figure out how to package your business to make it valuable no matter which exit channel you choose. How you package it, though, depends on which type of exit channels will work for you personally.
When deciding all of the possibilities for an exit, your first step is to take the lessons learned from the earlier articles about personal desires and values and apply them to your selection process. These desires and values not only dictate the concept and implementation of the business, but the constraints on the type of exit channel that is most appropriate for your business, as well.
Strategic business exit books often describe the different channels owners use to exit a business, such as liquidation, sale to employees or management, external sale to a person or corporation or as an initial public offering (IPO). Few owners choose liquidation or fully prepare their children, employees or managers with the skills and financial resources needed to pay a full price for the business. That leaves sale to an outsider or taking the company public through an IPO and only a few businesses are large enough or interesting enough to take the IPO route.
What these books don’t help you realize is that having a strategy gives you the ability to choose, and it is this choice that allows you to have the freedom to take action. These choices involve personal goals, personal risk profiles, tax law, corporate structure(s), accounting treatment and knowledge of business transitions, industry and market conditions. These choices directly affect the price and how and when you get paid. This is where a team of advisors is needed. This team should be comprised of a CPA, Corporate Attorney, Investment Advisor and a Business Strategist.
Remember, there are two parts to the exit: 1) getting your time back and 2) getting your money out. Each channel provides these in different amounts. Strategy and planning makes your ideal exit more likely, whether that is transfer to your children, a sale, IPO or any of the other channels mentioned above, at the same time minimizing the downside when you encounter snags along the way.
Developing your exit strategy gives you more freedom when it comes time to take action because you have all the information and tactics you need to act on. Next time, we will talk about the specific changes to your business that get immediate benefit regardless of the eventual exit and some simple concepts that you can use to put your strategy in place.