The Challenge of Exiting in Style

I think most of us would agree that we have just seen a very difficult 18-24 months. So it seems that existing business owners will need to engage in a new reality for the foreseeable future.

According to an article published by Robert Avery of Cornell University in February of 2006,

"the majority of boomer wealth is held in 12 million privately owned businesses, of which more than 70% are expected to change hands in the next 10-15 years."

Only a portion of these businesses will successfully cash out, because of supply and demand. Now that it is the middle of 2010, this means that this will occur within the next 11 years.

Key mistakes made by sellers:

Sellers allow too little time to complete a properly executed business strategy. Another error owners make is focusing on the price while disregarding the terms and structure of an exit transaction.

Here are a few other mistakes business owners make before exiting their companies:

• Selling to the (only) competitor who comes forward
• Not using experienced advisors (in order to avoid spending more)
• Setting expectations based on personal needs without considering the market
• Failing to explore legitimate positioning strategies

Buyers of middle market companies don't buy jobs for themselves in the way that small business buyers do. They expect a return equal to the risk. Nothing enhances a buyer's perception of value more than the following:

• Evidence of sustainable growth
• A capable management team as the key to managing the risk

The business owner who engages professional advisors, plans thoroughly, and negotiates to ensure that the wealth transfer mechanism chose most closely delivers on his or her goals, is the business owner who will have executed the optimal exit strategy.


For more information on Exit Planning, Valuations, M&A, and Business Brokerage, please call or email Joan Young, President of Sunbelt Business Brokers, Greater Bay Area at 408-436-1900 or jyoung@sunbeltbayarea.net.