The Exit Planning Continuum is a quick way to view a business owner’s “readiness” for an exit. There are three typical approaches to exit planning.
- The “I’m feeling lucky” approach sees the business owner taking a hands-off posture by turning the exit over to someone else and hoping for the best. This approach requires minimum time involvement and upfront preparation of the business owner. The downside of this approach is little effort is made to get the company and the business owner ready for a transaction and “surprises” during the transaction process are more likely to occur and derail the sale.
- The “Get ‘er done” approach fits the action-oriented spirit of many entrepreneurs and is characterized by jumping into the transaction process and making quick moves. This approach requires some upfront preparation and time involvement on the part of the business owner and is often employed when the business owner knows who he or she wants to sell to. The downside to this approach is that while the business owner may know “a buyer” there is a reasonable probability that they do not know the “best” buyer. This approach is also subject to surprises and compromises that can result in devaluing the company, obtaining less favorable terms, and creating seller remorse after the deal is closed.
- The “begin with the end in mind” approach employs a comprehensive, goal-oriented, and holistic methodology to planning an exit, building additional value in the company prior to the exit, and executing the business transaction with the highest probability of accomplishing the business owner’s personal and corporate goals. This approach requires the active and ongoing participation of the business owner and a commitment to getting both the company and the business owner ready. This approach maximizes the company’s valuation, reduces the likelihood of surprises that can threaten getting a deal closed, and structures the transaction on the most favorable terms.