Timing, timing, and timing
And more things to know about business exit planning.
by Chia-Li Chien | Apr. 29, 2015
When I was recently thinking about how to explain what makes up a successful business cash out event, three words first came to mind—Timing, timing, and timing.
According to private capital expert Rob Slee, there are truly three timing factors that must be aligned when planning a successful business exit (2009):
• Personal timing: The readiness of the owner to move on to something else more or less challenging.
• Business Timing: There must be a solid key management team able to operate with or without the owner or founder.
• Economic Timing: Knowing where the economic cycle is and if your industry is trending in the Market M&A (Merger and Acquisition) movement (not performance). (See details from Slee; 2007.)
Then, two other words came to mind. In my experience, I’ve found that most privately-held business owners are interested in creating a win-win situation for both themselves and their buyer(s) when the window is right. And, creating such a situation takes considerable time and planning.
As a matter of fact, according to research by Manolova, Brush, Edelman & Shaver (2012), one of the best business growth predictors really does involve considerable time and planning. However, the reason may be different from what you are thinking. It’s actually largely due to an owner’s desire to remain in survival mode rather than the desire to take the business to the next level.
Staying in survival mode can force you to miss your window—timing, timing, and timing. In other words, the longer you stay in survival mode, the less business equity value you have. And, the less business equity value you have, the less probability you will find yourself in a win-win succession situation.
Okay, so you decide to stop hanging on in survival mode. You’re ready to take it to the next level. Now what? Let’s start by examining why you’re in business (since we’ve decided the reason will no longer be “to survive.”) You must figure out your ultimate objective. You must plan how to eventually reach your desired business outcome.
Stay with me, here. Start by breaking down how aligned your business objective is with your personal objectives—let’s calls those hopes, dreams and passions. However much you think you have your lives (business and personal) compartmentalized, often times it’s personal objectives that can drive your business to a successful and planned cash out. It’s a win-win for your personal and business life.
For most people, it takes years to see it, but with thoughtful planning beginning today, your business can help you meet your ultimate personal goals, just as your personal goals can drive your business. See how that works?
Setting good personal and business objectives starts with knowing where you are today and where you are going in the next three to five years. Every business owner should constantly adjust timing during the growth cycle of the business. You must spend time watching and thinking about all three areas of timing to stay agile and competitive, to innovate, and to meet market needs.
Think you don’t have the bandwidth for business and personal planning? Let’s break it down to pros and cons for taking the considerable time needed for careful planning:
You’ll be more focused on your business purpose.
You’ll have to figure out your business purpose.
You’ll have a road map for reaching your objectives.
You won’t have that thrill of feeling lost and directionless that gives you an adrenaline rush.
You’ll meet your objectives within your desired timeframe.
(You can fill this one in.)
I would love to hear your objections to planning now for a successful cash out one day down the road. We can make more pros and cons lists, talk about timing, timing, and timing, and how planning can be a win-win for everyone involved.
Just contact me at firstname.lastname@example.org or 704-268-9378.
Manolova, T. S., Brush, C. G., Edelman, L. F., & Shaver, K. G. (2012). One size does not fit all: Entrepreneurial expectancies and growth intentions of US women and men nascent entrepreneurs. Entrepreneurship & Regional Development, 24(1/2), 7-27. doi:10.
Brush, C. G. (1992). Research on Women Business Owners: Past Trends, a New Perspective and Future Directions. Entrepreneurship: Theory & Practice, 16(4), 5-30.
Morris, E. (Producer). (2013). The Unknown Known. USA: Participant Media, LLC.
Slee, Robert T. 2009. Midas Marketing, how Midas managers make markets. Charlotte, NC: Burn the Boats Press.
Slee, Robert T. 2007. Midas Managers, how every business they touch turns to gold. Charlotte, NC: Burn the Boats Press.
Chia-Li Chien, CFP®, PMP®; Chia-Li “like JOLLY,” Succession Strategist of Value Growth Institute, dedicated to helping private business owners increase their company equity value. She is the award-winning author of the books Show Me The Money and Work toward Reward. Chia-Li is an Instructor & CFP® Program Director at Ball State University and Adjunct Faculty of the American Management Association. Her blog and newsletter was named a Top Small Business Resource by the New York Times You’re the Boss blog. Schedule your appointment today!