Last week we posted an article on the importance of being a committed seller before you begin negotiating with buyers of your business. In that piece, we discussed the reality of how vital it is to be dedicated to the process since reneging on a deal can be far more costly than just the lost opportunity of closing a transaction. The potential ramifications from a confidentiality standpoint alone can be huge.
It is interesting to us that often one of the causal factors impacting a business owner’s dedication to selling can be impacted by our topic today: not having a post-exit plan.
Now this may sound fundamentally flawed thinking but you would be amazed at how many business owners we meet with at our exit planning seminars that are keen on exiting but have spent little (if any) time planning what their lives will look like post-sale.
They may have grand dreams such as “sailing around the world” or “retiring in Monte Carlo” or even “opening a dude ranch in Wyoming.” But majestic dreams with no real planning in place can fatally impact a business sale at the 11th hour when the entrepreneur turns to the spouse and asks, “So what the heck am I going to do once I sell the company?” If the answer is a blank look and a shrug of the shoulders, you may have second thoughts at that point about exiting. Again, reneging at the 11th hour while negotiating with a buyer can have serious consequences.
So that is why we spend time getting to know our clients as individuals. The more we can delve into their interests, hobbies, lifestyle, and pastimes, the better we can ensure that they have a real, serious idea of what they plan to do post-transaction. It is interesting to note that based on our research, most business owners have not only no documented exit plan, they also have not spent time actually investigating what they would like to do after selling their business.
For many of our younger clients, especially those that are interested in a partial sale and being retained long-term by the new owners (or for those who are not ready to retire and want to stay on after the sale), the idea of post-transaction life is simple and clear. However, for the rest, especially those that are in their traditional retirement years, devising a plan is very important.
We recognize that many entrepreneurs have spent nearly every minute of the last 20-30 years focusing solely on building their business. There has been little time available for family and friends, let alone hobbies and related interests. However, it is clear that without a post-transaction plan, business owners often are faced with significant free time with nothing to fill it. Sometimes after a deal closes we hear from clients who in a few years tell us, “I need to buy a company from you guys because I am driving my spouse crazy hanging around the house now!”
This is not a scenario you want to fall into. That is why we counsel our clients to spend some time considering and brainstorming over what their lives will look like post-transaction. Not only is this vital from a personal enrichment standpoint, it will also help them determine what their financial needs may be in the ensuing years. This relatedly enables our dealmakers to craft transactions that meet our client’s desires, because for those needing to exit quickly and move on to stage two, some deal structures may not be as optimal. For example, if your goal is to retire as soon as possible and relocate thousands of miles away to be near your grandchildren, a five-year earn-out is most likely not a solid match.
These are issues you need to spend time examining with loved ones, friends, trusted advisors and most likely your wealth manager so that you can share your goals with your M&A advisor. If you are going to exit without M&A advice from a professional, be sure that you are clear with any buyer regarding your exit goals and timing (although be sure not to mention your expected business valuation expectations initially – let the buyer tell you what your company is worth).
You may find some of the plans that our clients have explored post-transaction helpful as you brainstorm regarding yours:
Bottom line: No matter where you are on the spectrum of exits, whether it be a partial sale and ownership retention indefinitely or a quick exit within 1-2 years post-sale, it is important to realize what your post-closing goals are and conversely how much capital you will need to fund your lifestyle. For this reason, we advise our clients to not only heed our advice as M&A professionals but to also create an exit planning team that in addition to friends and family includes a trusted accountant, M&A attorney, and wealth manager. All are equally important to ensure that you are motivated to sell and are clear about why.
If you would like to learn more about exit planning and developing a future life for yourself and your family, I strongly encourage you to attend a Generational Equity exit planning seminar. We hold these specifically for business owners who are interested in beginning to develop their exit options; they are highly educational and are designed for the busy business owner. An investment of a few hours of your time will pay dividends later.
To learn more call us at 877-213-1792 or provide us with your contact information and we will be in touch.
And be sure to have a good idea of what your post transaction life will look like BEFORE you exit.
By Carl Doerksen, Director of Corporate Development at Generational Equity.
© 2016 Generational Equity, LLC. All Rights Reserved.
it all started with a conference.
start your story today,
speak directly with one of our senior advisors +1-972-232-1121
The information we learn from customers helps us personalize and continually improve your experience. Here are the types of information we gather.
We receive and store any information you enter on our Web site or give us in any other way. We do not sell or rent your personal information to others without your consent. We use the information we collect only for the purposes sending promotional information, enhancing the operation of our site, serving advertisements, for statistical purposes and to administer our systems. We DO NOT use third parties to provide customer service, to serve site content, to serve the advertisements you see on our site, to conduct surveys, to help administer promotional emails, or to administer drawings or contests, but reserve the right to do so in the future without advance notice.
By submitting my name electronically and clicking the “submit” button, I understand that I am providing Generational Group, Inc., Generational Equity, LLC, Generational Capital Markets, LLC, DealForce LLC, their affiliates, representatives, contractors, etc. (“Generational Group”) my telephone number, which may include a number that is wireless and/or a number that is on a national, state, or other Do Not Call registry or list. I hereby consent and agree to receive telephone calls including any autodialed and/or pre-recorded telemarketing calls and/or text messages (telemarketing) from or on behalf of Generational Group at the telephone number provided. I further consent and agree that telephone calls may be made using automated technology such as an automatic telephone dialing system, artificial or prerecorded voice, or SMS text messaging. Consent is not a condition of purchase. I further warrant and represent that any telephone number provided is not on any state or national Do Not Call Registry and that by agreeing to these terms and conditions that if any number provided is on any such registry, I hereby consent and agree to receive telemarking calls and/or communications including any phone calls, text messages, URLs, links, emails, etc. to the telephone number(s) and/or any e-mail addresses provided. I understand that by entering my name in the electronic form provided, that I am signing my name as equally as if it was my handwritten signature and that it is my intent to provide an “electronic signature” as that term is defined in state and federal law, as well as industry practices for e-commerce.
For reasons such as improving personalization of our service, we might receive information about you from other sources and add it to our account information.
Generational Group may license the use of its intellectual property including but not limited to its name, likeness, and logo for the use of affiliated offices. Such affiliated offices may not be owned, controlled, managed, supervised or staffed by employees, officers, or agents of Generational Group. Affiliated offices may be independently owned and operated. For more information about a particular office, please contact Generational Group at its office in Dallas, Texas.
This page may contain other proprietary notices and copyright information, the terms of which must be observed and followed.
Information on this web site may contain technical inaccuracies or typographical errors. Information may be changed or updated without notice. Generational Group may also make improvements and/or changes in the products and/or the programs described in this information at any time without notice.
Generational Group does not want to receive confidential or proprietary information from you through our web site. Please note that any information or material sent to Generational Group will be deemed NOT to be confidential. By sending Generational Group any information or material, you grant Generational Group an unrestricted, irrevocable license to use, reproduce, display, perform, modify, transmit and distribute those materials or information, and you also agree that Generational Group is free to use any ideas, concepts, know-how or techniques that you send us for any purpose.
Our computer system protects personal information using advanced firewall technology.
Information Generational Group publishes on the World Wide Web may contain references or cross references to other products, programs and services that are not announced or available in your country. Such references do not imply that Generational Group intends to announce such products, programs or services in your country. Consult a Generational Group representative for information regarding the products, programs and services which may be available to you.
Generational Group makes no representations whatsoever about any other web site which you may access through this one. When you access a non-Generational Group web site, please understand that it is independent from Generational Group, and that Generational Group has no control over the content on that web site. In addition, a link to a non-Generational Group web site does not mean that Generational Group endorses or accepts any responsibility for the content, or the use, of such web site. It is up to you to take precautions to ensure that whatever you select for your use is free of such items as viruses, worms, Trojan horses and other items of a destructive nature.
IN NO EVENT WILL Generational Group BE LIABLE TO ANY PARTY OR ANY DIRECT, INDIRECT, SPECIAL OR OTHER CONSEQUENTIAL DAMAGES FOR ANY USE OF THIS WEBSITE, OR ON ANY OTHER HYPERLINKED WEBSITE, INCLUDING, WITHOUT LIMITATION, ANY LOST PROFITS, BUSINESS INTERRUPTION, LOSS OF PROGRAMS OR OTHER DATA ON YOUR INFORMATION HANDLING SYSTEM OR OTHERWISE, EVEN IF WE ARE EXPRESSLY ADVISED OF THE POSSIBILITY OF SUCH DAMAGES.
Furthermore, all information contained within this website is the property of Generational Group.
Success, you have been added to our list.