Section 4A: The need for exit planning Flashcards
A successful exit strategy has three legs
Maximizes transferable business value
Ensures owner is financial prepared
Ensures there is a plan for “what next?”
Exit planning is
present tense
Exit planning combines what
the plan concept effort and process into a clear simple strategy to build a business that is transferable through the 4Cs
What are the 4Cs
Human Capital
Structural Capital
Customer Capital
Social Capital
Your clients
Control how and when they exit
Maximize value in good and bad times
Keep more of what they get rather than paying it to uncle sam
Shorten the due diligence and documentation period
Have better control over confidentiality
Have strategic options to choose from
Know their future is secure
Blue oceans
denote all industries not in existence today
- untapped market space
- demand creation
- opportunity for high profitable growth
- Many are created from red oceans by expanding existing industry boundaries
- Competition irrelevant because the rules of the game are waiting to be set
Red oceans
represent all industries in existence today
- crowded
- profits and growth prospects reduced
- commoditized products and services
- cutthroat competition
Historic Transition success rates
- 12 months after selling - 3 out of 4 businesses profoundly regret
- 70-80% of businesses put on the market don’t sell
- only 30% of all family-owned businesses survive into the second generation
EPI state of owner readiness survey
What percentage do not know all their exit options
2/3 or 66%
EPI state of owner readiness survey
What % have no transition team
78%
EPI state of owner readiness survey
What % have no written transition plan
83%
EPI state of owner readiness survey
What % have no plan at all
49%
What percentage have no plan to cover the 5 Ds
40%
What percentage have not completed a strategic review or a value growth project
86%
What are the 5 Ds
Death Disability Divorce Distress Disagreement
What % of clients continue on after a triggering event
70%
What % of exits are not voluntary
50%
Owners are leaving $ on the table because they are focused on
income generation, not enterprise value
Exit planning is business strategy
Build, harvest and preserve wealth
What are the 5 stages of value maturity
Identify Protect Build Harvest Manage enterprise value
What is the first paradigm shift
Exit planning is business planning
What is the second paradigm shift
Value is all about transferability
Paradigm shift #3
Adopt a common framework
“ The Value Acceleration Methodology”
What does the Value Acceleration Methodology focus on?
Value Growth
and aligning business, personal and financial goals
