Business owners who create business plans are able to react more quickly to new events — events of the past few years in this economy and this world come to mind — than those without.
Unfortunately, even owners who have such business plans often fly without exit plans, co-pilots, or maps to help them when storms force them to alter course. If an unanticipated event arises, they shelve their exit planning thinking because their only option is to wait for conditions to improve.
According to a 2005 PricewaterhouseCoopers’ survey of 364 CEOs of privately held, fast-growing companies, 65 percent planned to leave their company within a decade or less: 42 percent within five years and 23 percent in five to 10 years. If that’s representative of the millions of businesses in the U.S., that could result in a glut of companies on the market, driving down valuations and giving new leverage to buyers.
If you are a baby boomer (born between 1946 and 1964), the generation following you is not nearly as big. Expect far more sellers than buyers in the marketplace.
Unless your company is superior to its competitors because there’s something about it that a buyer can use to make more money, that rising tide is going to lift you only as much as it lifts that glut of competitors. If you select “wait for rising tide in the economy and the M&A market” as your exit strategy, you’ve lost control of the timing of your exit, how much and the terms of payment you’ll receive, and even the type of buyer.
Among the benefits of exit planning are laser focus on the value-building aspects of the business that buyers seek; time-sensitive accountability for each action step necessary to build value; and benchmark changes in business value.
Concentrating your efforts on growing business value affects both your ability to sell your company and the price you will be paid. In fact, your value-building plan will be inseparable from your exit plan.
Bottom line, only the planning process sets up the best opportunity to exit your business in style despite the glut of sellers, dearth of buyers, vagaries of the market and investment world, and the myriad of known and unknown influences.
— Ahmie Baum is a certified financial planner with UBS Financial Services Inc., Ahmie.baum@ubs.com,
Business Workshop is a regular feature from local experts offering updates on matters affecting business. To contribute, contact Business editor Teresa Lindeman at tlindeman@post-gazette.com.
First Published: May 24, 2016, 12:51 p.m.
