By Patrick Ungashick, CEO

I speak to more than 50 business audiences per year about getting ready for exit, putting me in front of thousands of business owners. Perhaps the biggest mistake that I hear owners making right now with regard to their exit planning is not having an answer to this one question:

“What are you waiting for?”

Let me explain, because there are two potential ways to interpret this question.

Consider the Financial Implications of Not Selling Now

First, I commonly hear owners say they intend to exit and sell the company sometime in the next several years, with a typical answer of “within three to five years.” When I hear this statement, my next response is, “What are you waiting for?”

What I mean is why is that owner waiting a few more years? Why not just sell now? At the time of writing this article (October 2018), multiples for small to mid-market companies are near all-time highs in most industries, and buyers are flush with cash.

If you seriously intend to sell sometime over the next three to five years (which is only 36 to 60 months), then why not go ahead and try to sell the company now? A reasonable person can conclude that multiples are likely to be lower in the near future.

Consider the financial implications if you don’t sell now. If multiples in your industry fall by 25% over the next few years — a common decline when coming down off the highs we are currently experiencing — then your company has to grow its profits by 25% just to tread water on its value. Why take that risk?

There are sound and compelling reasons to wait to exit despite today’s strong prices. I am not suggesting that a business owner should rush and exit before he or she wants to or is prepared. But that’s not what I hear when I ask this question.

Overwhelmingly, owners don’t have a concrete answer when I ask what they are waiting for. Typically, they offer up vague answers about being busy or pursuing more growth without a clear finish line. That’s a mistake. If you are going to sit out the current strong market, do so for clear and compelling reasons. If you lack clear and compelling reasons, then go back to the question:

“What are you waiting for?”

(Before proceeding, a quick editorial comment. As exit planners with a business predicated on five-year exit strategies, suggesting you should consider exiting now potentially eliminates you as a prospect for our services. I point this out to illustrate why I ask this question regretfully.)

Not Preparing for Exit Creates Unnecessary Risk

There is a second interpretation of my question. Many owners recognize that they are not ready to exit right now. Common reasons owners and companies are unready include:

• The company is too reliant upon the owner’s involvement
• The customer base is heavily concentrated around a few large accounts
• The leadership team has holes in it or needs upgrading
• The financial statements and report are not sufficiently reliable and robust
• The partners (if applicable) are not in alignment
• The owner has not yet figured out his or her plans for life after exit

Whatever the reasons, the mistake is not being unready for exit. Rather, the mistake is waiting to make the commitment and waiting to create a plan to address these issues by a specific deadline.

Companies do not get ready for exit without significant effort – getting ready for exit takes years of work and preparation. (Ask any owner who has exited and you will almost universally hear, “Yes, I wish I had started earlier and given myself more time to prepare for exit.”)

To be fair, owners do not have to engage outside help like us — they can do it themselves. But whether working with advisors or doing it on your own, what are you waiting for to prepare yourself and the company for exit?

When I ask this version of the question, owners offer up the same vague answers as before about being busy or pursuing more growth without a clear finish line. At some point, owners have to realize that they will always be busy, and the company will always have more potential ways to grow.

Unfortunately, this realization often comes too late. Waiting to commit to getting the company ready creates unnecessary risk, and it is perhaps the primary reason why so many owners struggle to exit smoothly and happily.

So… What are you waiting for?

To learn more about the steps necessary for a successful exit, contact Tim for a complimentary consultation: 772-221-4499 or email.

The Upside of Stress

By: Kelly McGonigal

Periodically, I share a favorite book review from Readitfor.me.

There is never enough time to read all the latest books – this tool is a great way to learn and to stay on top of the latest topics and new ideas.

The Readitfor.me tool has grown into a great resource for both personal and team growth, offering book summaries, micro courses and master classes. Check out this link: Readitfor.me. See how these tools can help build you personal and Team Strength.

Here is a summary of the Book
The Upside of Stress
 by Kelly McGonigal

Book Review by Readitfor.me

As it turns out, whether or not stress is harmful has a lot to do with how you view it.

Read on to learn how to change your mindset about stress.

Stress is bad for you, right?

As Kelly McGonigal tells us in this fascinating book, the research that scientists have done on stress tell a slightly different story.

As it turns out, whether or not stress is harmful has a lot to do with how you view it.

Consider the following research findings comparing people who view stress as harmful to people who view stress an enhancing.

People who believe stress is enhancing are less depressed and more satisfied with their lives than people who view stress as harmful. They have more energy and less health issues. They are more productive at work and are happier doing it. They also have a greater confidence in their ability to cope with challenges, and even find meaning in difficult circumstances.

That’s a pretty long list of benefits just for changing your mind about what stress means to you.

Join us for the next 12 minutes as we explore what stress actually is, and how you can completely change your relationship with it.

You might even learn how to harness the stress in your life to create a more meaningful, fulfilling life.

Let’s get started.

What is stress?

We first need to start with an understanding of what stress actually is. When you are feeling stress, your body releases cortisol and adrenaline.

From an evolutionary perspective, this stress response is designed to help you. But – like stress in general – it is more feared than appreciated. We’ve come to associate stress as toxic a state which we should try to minimize as much as possible.

But, as we’ll describe as we work our way through this book, your stress response is a resource to rely on rather than an enemy to eliminate.

How stress got a bad name

We won’t spend much time on this section. Basically, a scientist by the name of Hans Selye did a lot of stress research in the 1930s and 40s that showed that stress caused negative physical reactions.

He became known as the Grandfather of Stress, and was nominated for the Nobel Prize ten times, and devoted his life to spreading the word about his research, leading us all to believe that stress is toxic.

The problem is that all of his research was performed on rats, and in situations that bear little resemblance to everyday human stress.

This is what a typical day looked like for one of Selye’s lab rats. You’d start off with unpredictable, uncontrollable shocks. Then you’d get thrown in a bucket of water and forced to swim until you started to drown. Then, finally, you’d get put into an overcrowded cage with other rats where you would fight over an inadequate supply of food.

That, McGonigal rightly points out, isn’t stress – that’s the Hunger Games for rodents.

Nonetheless, Selye made the leap from rats to humans, and from torture to every day stress, and voila – we all developed a negative view about stress.

So now you have a negative mindset about stress

In recent surveys, the American Psychological Association has found that most people in America perceive their personal levels of stress as unhealthy.

These people believe that experiencing stress:

• depletes their health and vitality
• debilitates their performance and productivity
• inhibits their learning and growth
• is negative and should be avoided.

People who have this mindset about stress are much more likely to say that they cope with stress by trying to avoid it. They are more likely to:

• Try to distract themselves from the cause of the stress instead of dealing with it.
• Focus on getting rid of their feelings of stress instead of taking steps to address its source.
• Turn to alcohol or other substances or addiction to escape the stress.
• Withdraw their energy and attention from whatever relationship, role or goal is causing the stress.

Obviously, this reinforces the belief that stress is bad and should be avoided at all costs.

But as we turn our attention towards the benefits of embracing stress, we’ll find a much different story emerges.

Changing from a negative mindset to a positive one

As it turns out, you have a choice about how you respond to stress. Victor Frankl described this as the space between stimulus and response.

A minority of people in the general population believe that stress enhances their lives. These people believe that experiencing stress:

• enhances their performance and productivity
• improves their health and vitality
• facilitates their learning and growth
• is positive and should be utilized.

Where people with a negative mindset towards stress try to cope with stress, people with a positive mindset towards stress try to use it to their advantage. They are much more likely to:

• Accept the fact that the stressful event has occurred and is real.
• Plan a strategy for dealing with the source of stress.
• Seek information, help, or advice.
• Take steps to overcome, remove, or change the source of stress.
• Try to make the best of the situation by viewing it in a more positive way or by using it as an opportunity to grow.

So, just by creating a positive mindset about stress, you can turn self-doubt into confidence, fear into courage, and isolation into connection.

All without getting rid of the stress.

Which begs the question, how do you change your mind about stress?

The insight from the research is that you get what you expect. If you expect stress to be a negative experience, that’s exactly what you will get. If you expect it to be a positive experience, that’s exactly what you’ll get.

There is evidence for this in a lot of different areas of your life. For instance, how you think about getting older has some serious consequences for you later in life. People who have a positive view of aging add an average of 8 years to their life, and have an 80% lower risk of a heart attack.

Your mindset not only helps you in the moment, but also influences you to make better decisions in the future, leading to better outcomes. It’s as though mindset matters twice.

Now let’s turn our attention to the three different ways that your new positive mindset about stress will help you lead a more productive and fulfilling life.

Stress helps you engage

In this section we’ll focus on how you can transform a threat into a challenge.

Our common reaction to stress is to avoid it, and the most common advice you get when do deal with stress in the moment is to “calm down.” Basically, you should find a way to get rid of the stress.

However, viewing the stress response as a resource can transform the physiology of fear into the biology of courage. The stress response does a number of things that will help you perform well under pressure.

It focuses your attention, heightens your senses, increases your motivation, and mobilizes energy. This is true even when the stress doesn’t feel helpful, which is the case when people experience anxiety.

When you start to feel your heart pounding or your breath quickening, remember that this is your body’s way of trying to give you more energy. When you start to feel tension in your body, remember that the stress response gives you access to your strength. Are your palms sweaty? Good, that means you are close to something that you want. Do you have butterflies in your stomach? Embrace them – it’s your guts way of saying that this is something that matters.

If you take the traditional advice and try to calm down, you are preventing yourself from accessing the energy, strength and drive that the stress gives you. So, instead of trying to take a deep breathe to try and calm down, take a deep breath and sense the energy that’s available to you.

Then, use it. Ask yourself what action you can take that is consistent with your goal in this moment.

Connect: How tending and befriending transforms stress

In this section we’ll focus on how you can activate your “tend-and-befriend” response to better deal with stress.

From an evolutionary perspective, we have this “tend-and-befriend” response to make sure we protect our offspring. Rather than get paralyzed with fear (and let our offspring get eaten by that lion), we spring into action.

It does so because it increases activity in three systems in your brain.

First, it activates the social caregiving system, which is regulated by oxytocin. When this happens you feel more empathy, connection and trust.

Second, it activates the reward system, which releases the neurotransmitter dopamine. When this happens you feel more optimistic about your ability to do something meaningful, and it primes your brain for physical action, ensuring that you don’t freeze under pressure.

And third, it activates the attunement system, which releases to neurotransmitter serotonin. When this happens, your perception, intuition and self-control are all enhanced to ensure that the actions you take have the biggest positive impact.

In other words, as McGonigal points out, the tend-and-befriend response makes you social, brave and smart. Which is a much better response than trying to avoid dealing with whatever is causing you stress.

So, when you are feeling overwhelmed, look for opportunities to do something for somebody else that goes beyond your regular responsibilities.

Fair warning – your brain is going to tell you that you don’t have the time or energy to do it. But that’s exactly why you should. The good news is that small gestures work just as well as grand gestures to activate this response, so just get into action rather than waiting for the perfect moment to do something big.

Grow: how adversity makes you stronger

In this last section we’ll focus on how stress can actually help you learn and grow.

As McGonigal points out, the idea that we grow through adversity is not new. It’s embodied in the teachings of every major religion.

The science shows that plenty good can come from stressful or traumatic experiences. Here is a partial list of some of the positive changes that are commonly reported in cases of hardship, loss or trauma:

• A sense of personal strength;
• Increased appreciation for life;
• Spiritual growth;
• Enhanced social connections and relationships with others;
• Identifying new possibilities and life directions.

The important part, McGonigal explains, is that the good that comes from difficult experiences isn’t from the event itself – it comes from you.

What it requires is for you to look back on the difficult experiences from your past, and to reflect on the positive changes that came from them. Then, when you are faced with future stressful situations, you’ll be able to recall how you were able to overcome them in the past to help you overcome them in the moment.

This creates a growth-mindset towards adversity.

Conclusion

For many business owners, taking a multi-week vacation sounds like torture. Even if you manage to take time away from the company for an extended period, most owners are unable to fully unplug while away. You have to bring the company with you: frequent phone calls, regular emails, and a few hours’ work here or there while the rest of the family enjoys themselves.

The conventional explanation for why business owners do not take uninterrupted time off is that they are Type A control freaks who cannot let go. While a few owners may suffer from workaholism, it is not the most likely candidate.

If you don’t like long vacations, it’s probably not a personality flaw, but rather due to either of two contributing reasons. And both reasons are important to understand if you want to happily exit one day in the future.

Reason #1 – Your Team Is Not Running the Company While You Are Gone

The first major reason owners have bad experiences when taking time away has to do with your team — they are not actually running the business in your absence. We constantly hear business owners bemoan that taking vacation time is frustrating because they return to find an overloaded email inbox and a stack of issues requiring immediate attention.

This is a clear sign your team is not running the company in your absence — rather, they are stockpiling work until you return. You must create a team that is capable of running the company without you for at least a few weeks, including handling your normal responsibilities.

This is not simply to allow you some quality vacation time. If the company cannot run without you, it will be difficult, if not impossible, to achieve commonly-held exit goals: selling the company for a strong price, achieving a smooth succession, and exiting on your own terms. When you return from a vacation, you should return to an empty inbox and a short stack of issues requiring immediate attention.

Reason #2 – You’d Rather Be Working

The second major reason owners often do not take an extended vacation has to do with you — you enjoy what you do so much that being away from your company for a few weeks is simply not fun. You’d rather be working.

By itself, this is a blessing. As the saying goes, “If you love what you do, then you never have to work a day in your life.” In the long run, the deep connection and affection business owners feel for their company can become a serious problem. One day you will want to exit — few owners aspire to die at their desk — and when you decide to exit, you will want to have a meaningful and fulfilling life after the company.

But if you cannot happily take even a few weeks away from the business, ask yourself, how will you find engagement and fulfillment once you have permanently exited from the business? Taking a few weeks away from the business gives you small, bite-sized opportunities to do just that.

How to Change This

Taking time away and fully unplugging from the company is critical. Too many owners look back later in life and wish they would have found more time for family and friends. Do not make that mistake.

In addition, taking time away from the company also benefits the business. It gives your leadership/management team a chance to see how well they can perform without you. Removing yourself from the company for a few consecutive weeks stress-tests your people and systems, revealing unforeseen weaknesses and uncovering unknown strengths. Furthermore, time away gives you the chance to explore options and envision plans for your future life after exit.

To catalyze change within your company, evaluate your leadership team. If they are incapable of running the company for at least two weeks without you, you must develop a plan and timetable for how you will cultivate the team that you need.

If you believe your team is capable of handling the company in your absence, take the following steps:

• Meet with your team and let them know you intend to take a few weeks off and fully unplug while away.
• Delegate one person to review your mail, email, and phone messages and assign any issues that arise.
• Tell them you expect them to fully handle all company operations, including your responsibilities.
• Specify the issues that they should not handle on your behalf but leave for you — it must be a very short list.
• Instruct them that they are not to contact you while you are out unless for an emergency that they cannot handle. If necessary, describe realistic scenarios that would qualify as an emergency. This, too, should be a short list.
• Schedule advance meetings with your team for immediately after you return. At these meetings, your team should be prepared to brief you on what happened while you were away, including how the company performed, what significant actions they took, and what issues require your attention.
• Finally, give your team feedback on how they performed in your absence. Reward strong performance, and provide coaching and training appropriate for any inadequate performance.

To learn more about preparing yourself and your company for exit, schedule a complimentary consultation.

To learn more about the steps necessary for a successful exit, contact Tim for a complimentary consultation: 772-221-4499 or email.

The number one goal most business owners wish to achieve at exit is to reach personal financial freedom. (We define financial freedom as reaching a point where working is a personal choice, not an economic necessity.)

While everybody’s dollar amount is different, reaching financial freedom is practically a universally-held goal. To have a good chance of reaching this goal, it is not enough to merely calculate the target number you need at exit.

Most owners have three distinct needs they must meet to attain and maintain a financially happy life at exit and beyond. Fail to address any of these needs, and you may not be able to exit happily. Or, you might exit only to realize somewhere down the road that you regret the decision.

Here are the three needs you must address to reach and maintain your financial goals:

#1 – Replace Earned Income

The first need is to replace earned income. After you exit, you will need to replace the income previously earned from your business with investment income sufficient to support your personal lifestyle. This need may seem straightforward, but owners are often surprised by the challenges involved.

It is not unusual that your business generates a higher level of annual income than a prudently-invested portfolio can produce. Assume you enjoy an annual income of $X amount from the company, but your financial planning and forecasts indicate that, after you exit, your investment portfolio will only generate an annual income of less than $X. That is not exciting to contemplate.

Taxes often worsen the picture. If you sell your company at exit, you likely have to pay a significant amount of unrealized taxes at that time. This tax bill erodes how much you have to invest after exit, further reducing the income stream.

Furthermore, most owners enjoy a portion of their lifestyle subsidized by their business. The business pays for some (or all) of the following: vehicles, cell phones, computer, meals, travel, insurance, taxes, etc. These company-paid expenses shift to personal expenses at exit, thus increasing the amount of personal income required after exit to maintain the desired standard of living.

Ultimately, if you cannot replace the income you receive from your business with a reliable stream of income from your investments post-exit, you may find yourself trapped in the company and unable to afford to exit.

#2 – Transition from Running a Company to Running a Portfolio

The second need is less obvious but no less important for your exit happiness — you will need to make the transition from running a business to running a portfolio. There are certain skills and tactics that made you a successful business owner, and these may not be the same skills and tactics needed for investment portfolio management.

Being a successful business owner does not necessarily translate into being a successful investor. For example, successful investing often involves patience, taking a disciplined approach, and not reacting too quickly when investment markets fluctuate in short-term movements.

However, being a successful business owner and entrepreneur often demands that you be willing to react quickly to market opportunities as they present themselves. You will not feel financially secure as long as you are uncomfortable or unprepared with the steps and tactics required to manage your post-exit portfolio most effectively, regardless of how large it may be.

#3 – Manage Pre-Exit Risks

The third need is to manage ownership risk before your actual exit. Many owners do not consider their company to be a risky asset because they lead it and largely control its activities. But if you are like most owners, then prior to exit, 50%-90% of your net worth is tied up in your company.

It is undeniable that having the majority of one’s net worth tied up in any asset creates risk. If something happens to you or your company prior to exit, your future financial freedom is at risk. For example, imagine you own three assets:

• A piece of real estate worth $5 million
• Cash account with $5 million
• A company worth $5 million

All three assets are equally worth $5 million, yet the risks associated with owning the company are different and higher. If you became seriously ill or died prematurely, the real estate and cash likely maintain their value, but your company’s value may suffer a severe reduction without you.

The same risk exists if something happens to your company rather than you. If a large customer leaves your company, the cash and real estate will still be worth the same amount, but the company value may depreciate. Therefore, to reach financial freedom at exit, you must take the proper steps to address the inherent risks that come with owning a company. After all, you only have one shot at exit success.

Reaching Financial Freedom

These three needs will help you understand the to-do-list as you migrate from current business owner to investor. You are beginning a major life transition. Up to this point, your primary source of income has been your business, and as the owner, you have been in a position to call the shots.

But you only have one shot at exit success, so you need to get it right. As the saying goes, “You can get rich by investing in one company, but you can’t stay rich that way.”

What to Do Next

The most important next step is to sit down with experienced advisors, clearly define your financial and other exit goals, and develop the plan that will achieve those goals. To learn more about the steps necessary for a successful exit, contact Tim for a complimentary consultation: 772-221-4499 or email.