Why solving this equation is the key to a successful business exit

Mathematics is not “mathematics”.

Last yr, the Exit Planning Institute (EPI) produced the Owner Readiness Report, the first national survey in 10 years to measure owners’ readiness to exit privately held businesses. It was an extensive survey in which over 1,200 business owners participated.

Good news? 95% of business owners agreed with this statement: Having a transition strategy is vital for my future, in addition to the way forward for my company. This is especially excellent news considering that 57% of baby boomers and 38% of Gen X owners expect to leave their firms in the next few years.

But not all the pieces is IT related, dear business owners.

Only 68% of us sought external advice on transition plans. Worse yet, only 14% have established a formal transition advisory team whose sole purpose is to prepare the owner for the exit. This signifies that although 19 out of 20 owners imagine that strategic preparation for exiting the company is vital, only about 3 out of 20 owners live this way.

And that just doesn’t add up.

“But I have all these people!”

Good entrepreneurs and business owners consistently seek outside advice and help. So it is easy to think that you just actually have an external team of exit advisors.

Here’s the litmus test:

• Is your team working together to transition your business? If a team is isolated – working only in its area of ​​expertise, without knowing or appreciating what the other members are doing – then they are not working collectively or together.
• Do you have all the people you would like? The core members of your team must include a lawyer, an accountant, a development advisor/coach, and a financial planner. These people constitute the “4” factor in the 4×3 model, as we’ll discuss in a moment.

Remember that exit and transition planning means building value for your organization so that when the time comes to exit, you may do it on your terms. Building value is a lifestyle, not something you do when the end is near. So even if you are not one of the many owners planning to leave the company in the next few years, exit and transition planning should start now.

Multiply your value: 4×3 model

Once you have the core members of your external transformation advisory team in place—your lawyer, accountant, development advisor/coach, and financial planner—it is time to engage them in the work of growing your value.

These advisors must work as a team to show you how to set goals and integrate strategies to achieve your goals in three areas: business, personal and financial. Think of those areas as the three legs of a stool, as we call them at EPI. Since you may’t sit on an uneven stool, you would like to put equal effort into each area.

1. Business: Decentralize the owner to ensure post-exit success while developing and assessing the 4 intangible capitals: human, customer, structural and social.
2. Personal: Identifying the next stage in the owner’s life and how the transition helps them reach that stage. Today, younger owners plan to own and leave multiple businesses throughout their lives.
3. Financial: Too many owners keep their assets tied up in their businesses. By building value – not only revenue – you may harvest that wealth to make sure you can be financially successful once you exit the company.

Four advisors, each working on the same three legs of the stool. This is the way you increase your value.

Factor X: without it you can’t reproduce

While “x” may mean multiply, it also refers to the X-factor of the entire core team – that is, the quality or secret sauce that makes the team successfully work towards your exit.

Getting your core team of advisors to work together – not only inside your functional area – is harder than it seems. Everyone may have a different idea of ​​what is most vital when it comes to identifying the predominant strategies to achieve your business, personal and financial goals.

Each owner has an accountant and a lawyer. Often, your personal financial advisor is disconnected from your business. Too often, owners view the development advisor/coach as a purely functional person – someone who comes in from time to time to provide advice. However, these are the predominant members of your team and all of them need to be well-coordinated and speak the same language.

One of those key members must function the project manager and this person ought to be a Certified Exit Planning Advisor (CEPA). (It’s even higher if the entire core team is CEPA certified!) With CEPA at the helm of your external advisory team, you may be certain that accelerating value – and subsequently a successful exit on your terms – will remain the team’s primary focus.

When all 4 advisors focus on increasing value in three key areas (4×3), you’ll solve the X problem – that is, the X factor and the variable that will definitely have the best impact on your exit.