| Two failed attempts to sell my business taught me | | | | business was a subchapter-S corporation, my income |
| that I needed a formal exit plan, rather than a vague | | | | would come from earnings. To prepare for Plan C, I |
| notion that some day I'd sell the company and live | | | | began to work part time. First four days a week, |
| happily ever after. In both cases, I would have been | | | | then three days, and finally two days a week at the |
| required to continue as an employee after the sale, | | | | time the company was sold. I trained the |
| and I knew I didn't have the desire or personality to | | | | management team to plan strategies, negotiate |
| become an employee in my own company. With | | | | contracts, and make hiring decisions. We also |
| professional help, we included a flexible exit strategy | | | | implemented cash management procedures to ensure |
| called "Plan A, Plan B & Plan C" in the strategic plan. | | | | there would be sufficient cash to support Plan C. |
| Plan A, the first choice, was to transfer ownership to | | | | Actually, our preparations for Plan A, Plan B, and Plan |
| the management team. So we started stock | | | | C were good for the company in general. For |
| subscription plan through payroll deductions and | | | | example, building a management team strong enough |
| bonuses - they owned 35 percent of the stock | | | | to buy the company was essential for Plan A, plus it |
| when the company was sold. As part of strategic | | | | was valued highly by the eventual third-party buyer |
| planning, we created a brand to differentiate us from | | | | (Plan B) and would have been vital if I retired from |
| competitors, set annual and 3-year growth goals, and | | | | daily activities (Plan C). Similarly, the cash |
| designing procedures. The management team also | | | | management process so important in Plan C yielded a |
| participated in Board of Directors meetings, one as a | | | | balance sheet that supported bank financing for a |
| member and the others as regular presenters. | | | | management buyout (Plan A) and produced |
| Experts evaluated our business and defined 17 | | | | attractive cash flow for potential buyers. |
| factors (download them from the website) that | | | | Something like an A-B-C strategy would be useful for |
| determined how much it was worth. Unfortunately, | | | | your exit too. One way or another, some day you |
| when the time came to secure the loan to buy | | | | will leave your company - willingly or unwillingly, alive |
| 100% ownership interest, the management team | | | | or dead. Once you take the plunge and become a |
| decided they were not willing to sign personal | | | | business owner, there are just six exit options: |
| guarantees. | | | | (1) Transfer ownership to family member(s), |
| That possibility was anticipated in Plan B, the #2 | | | | (2) Sell the company to an employee(s), |
| preference. Plan B was to sell the company stock to | | | | (3) Sell the company to an outsider, |
| a strategic buyer who could parlay the company's | | | | (4) Become an absentee owner, |
| client base into rapid growth or to a financial buyer | | | | (5) Liquidate the company (i.e., sell assets individually), |
| who would use it as a platform for an IPO or roll-up. | | | | or |
| We were confident that Plan B would succeed | | | | (6) Run the company until you die. |
| because we had been approached frequently by | | | | You may choose any option(s) you like, and each |
| potential buyers and our area was government | | | | option has multiple variants. But if you fail to make a |
| services, a hot market after 9/11. I also attended | | | | choice, by default you are choosing option (6). If you |
| seminars to learn what buyers were looking for, and | | | | choose several alternatives like I did, you can order |
| took action to maximize the company's value and | | | | them as first choice, second choice, etcetera. It turns |
| eliminate the "warts" - things that cause buyer | | | | out that things you do to prepare for your top |
| concerns. | | | | alternative will also help most of the other options. |
| If we didn't find a third-party buyer who offered an | | | | The important thing is to begin planning your exit |
| acceptable price, we intended to implement Plan C - I | | | | strategy and timetable long before your target exit |
| would retire from day-to-day activities and direct | | | | date. |
| operations as Chairman of the Board. Since the | | | | |