By: Patrick Ungashick

Have you ever attended a presentation where the speaker asked audience members to raise their hands if they believed themselves to be an above-average driver? Typically, about 95% of the people in the room raise their hands. This would be impossible, unless the room was full of Formula One and NASCAR drivers. In a room full of randomly selected adults, 95% cannot be above-average drivers. There is a scientific explanation for what is happening, and it offers critical insight for business owners hoping to exit happily one day in the future. Here’s why.

The scientific principle at work is most commonly called illusory superiority, and most of us suffer from it at one time or another. Illusory superiority is a cognitive bias wherein a person overestimates his or her abilities and qualities relative to others. Several psychological experiments have revealed illusory superiority in action. For instance, in a 1977 study, a whopping 94% of professors rated themselves above average relative to their peers. Other studies have shown people tend to overestimate how charitable they will be, or of course their driving skills. Interestingly, illusory superiority seems to be rooted in North American culture—in many Asian societies; the phenomenon does not exist.

The illusory theory also applies to business owners contemplating exit. Most business owners know that the exit process is typically stressful and difficult and that a significant number of owners fail to exit when they want, how they want, and for the value that they want. But, most owners also seem to feel that they are unlikely to suffer any of the obstacles or setbacks that commonly plague others. In exit planning and our experience, most owners overestimate their readiness to exit and underestimate the challenges they will face. This behavior is illusory theory in action.

Psychologists who study illusory theory offer explanations as to why it occurs, which can help business owners better approach exit. A leading cause for illusory behavior is that “soft skills” like driving, lack rigorous mechanisms to measure and verify one’s competency, allowing us to assume that we are more qualified and prepared than we might actually be. That’s why people over-estimate their driving skills but are unlikely to over-estimate harder skills such as playing golf or piloting a plane, where one’s competence or preparedness are unequivocally revealed.

When getting ready for exit it is easy to assume that you are sufficiently ready and prepared, particularly if you have never exited from a company before. This assumption leads to underestimating the work that needs to be done and the time required to do it—arguably the biggest mistake owners make. Most owners lack tools and mechanisms to objectively evaluate how ready they and their company are to exit, and how likely they will achieve their exit goals. This too is the illusory theory in action.

If you are like most owners, you have too much at risk at exit to assume you are adequately prepared. Consider the following steps and resources to have a better plan:

• Educate yourself on the key questions and issues that most owners face as their near exit. Once you start telling yourself you want to exit sometime within the next five years, you will have work to do and must identify how and where to get started.
• Research what goes into an exit plan. Many owners will say, “Sure I have an exit plan” without knowing all the elements and areas that a sound play must address. This comprehensive article can get you started.
• Work with advisors who have helped owners like you achieve their exit goals. Your exit is too important to leave it to people who are not specialists.

If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

By: Patrick Ungashick

Two Mercedes-Benz sedans of the same make, model and manufacturing year are sold, but one goes for a higher price than the other. There are many reasons this commonly occurs. The car which sells for a higher price may have lower mileage, offer more amenities, is in better condition, or has a better service record.

This phenomenon is not unique to Mercedes-Benz or automobiles in general. The same reality happens with practically any asset, including companies. Take two companies from the same industry and similar size, offer them for sale, and one sells for a premium price compared to the other. It happens all the time. However, there is one important difference between cars and companies. The car that sells for a premium price may get its owner a few thousand dollars more at sale compared to the other car. The company that sells for a premium multiple may get its owner a few hundred thousand or a few million more for its owner. Therefore, it pays to know the right steps to take to maximize value at sale.

There are factors or conditions within a business—practically any business—that will increase (or decrease) its value at sale. If you are a business owner contemplating exiting one day in the future by way of sale, it is essential to know what these conditions are, and create them within your company. As you will see from this introductory article, the conditions take time—usually three to five years or longer—to fully achieve, so the sooner you get started, the better. Pursue these seven steps to make your company potentially sell for a higher price and better terms at your exit

Seven Steps to Maximize Business Value

1.Build a strong team. Companies with excellent leaders and managers are highly valuable. Practically every buyer wants top talent. If your organization has a strong leadership team that stays with the company after your exit, your business is likely more valuable.

2.Reduce dependency on you. If without you, the company will likely have lower sales, weaker operations, or make fewer profits, your company is nearly always going to be less valuable to a buyer. The business’s value cannot walk out the door when you do. (Here’s eight ideas on how to do this.)

3.Organize your financial statements and reports consistent with buyer expectations. Buyers want to see at least three and preferably five years of historical financial statements organized and formatted in a manner consistent with their expectations. Learn what the expectations are in your industry. These requirements could mean audited financials, using accrual and not cash accounting, or following GAAP standards. Make sure your EBITDA is normalized too. All of this work usually improves value at sale, assuming the company’s underlying financial results are attractive.

4.Be ready to present a compelling growth strategy and plan. Buyers purchase companies not for their past results, but their expected future results. Make sure your company can tell a credible and compelling story for how it will achieve significant growth over the next three to five years. This written document is commonly called a strategic plan. Ideally, your industry is a growing industry as well. Companies that can tell this story are nearly always more valuable at sale compared to companies that cannot.

5.Diversify your customer base. Buyers do not like risk, and often will either pay less for a riskier company or pass altogether on buying it. Customer concentration creates risk for buyers. When the faces around the table change, customers (even well-served customers) often pause and ask themselves if this wouldn’t be a good time to re-evaluate their options in your market. Ideally, no more than 10% of your sales and profits for the last several years have come from the same customer(s).

6.Create a brand that others want, and that you indisputably own. Your brand does not have to be the next Coca-Cola, Google, or Nike to offer value to a buyer. If your brand or brands are well-known and respected in your industry, that will nearly always add value at sale. Creating brand value takes time and effort. Make sure you own your brand—having a company, and a website or two is not enough in most situations. Work with experienced advisors to create a valuable and defensible intellectual property (IP) strategy and portfolio. (This webinar tells you how to build brand value.)

7.Remove obstacles to scale. Buyers do not want companies that have barriers to growth. They are attracted to businesses that seem to be well poised to achieve a significant increase in scale. Review all of your business’s vital systems and processes: sales, operations, customer service, financial, training, etc., identify potential or existing bottlenecks and devise strategies for removing them. Ask yourself and your team if your company doubled in size nearly overnight, could that increase in volume be supported? If not, address the limiting factors. Companies that can support growth are typically more attractive to buyers.

More Ideas and Resources

These seven steps will maximize your company’s value at sale. For this reason, we call the business conditions described above the Seven Areas of Transferable Value™.  These seven steps might not make your business bigger regarding revenue or profits, but they usually will make it easier and less risky for a buyer—thus increasing your company’s value when it transfers to a buyer or successor.

Certainly, there are other important steps to successfully selling a business. It’s important that you know your company’s critical performance metrics, and make sure that they are all pointing in the desired direction. Also, assemble a competent team to advise and assist you—resist chasing the latest “offer” that arrives in your email inbox.

Maximizing business value takes years of work prior to exit. Owners who wait too long to get started might still be able to sell their company, but they risk missing out on thousands to millions more at exit. If you intend to exit anytime in the next five years (https://www.navixconsultants.com/your-last-five-years-ebook) then it’s time to get started planning your exit.

If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

By: Patrick Ungashick

A common question we hear from business owners anticipating selling their company is, “How do I select an investment banker?” As exit planners, part of our role includes helping business owner clients field a team of advisors that can achieve a successful exit. If you intend to sell your company to an outside buyer, an investment banker (or M&A advisor, business broker, etc.) likely plays an important role. Because many business owners have never been through a transaction, knowing what to look for in an investment banker may be new and unfamiliar territory. But selecting the right banker is essential because the wrong choice can cost you thousands to perhaps millions of lost dollars, and/or consume up to a year or more of lost time.

In exit planning and our experience, business owners should apply these five criteria to their search for an investment banking relationship that best fits their situation, needs, and goals:

1. The Banker’s Typical Deal Size = Your Company Value

Select an investment banker that routinely works with companies of similar value to your business. A banker who typically works with companies around $10-20 million in value may not be the best choice if your business is worth $200 million, and the reverse. If your business is significantly larger than the banker’s typical deal size, that professional may lack the experience and resources to represent your company effectively during the sale process. If your business is significantly smaller than the banker’s typical deal size, you may not get the attention and effort required to be successful.

To discern if the size is a good match, ask the investment banker to list the five to ten most recent transactions that he or she directly represented, including company size, industry, and other relevant data. If the banker you are considering is part of a larger team or firm, be sure that the list includes transactions that your investment banker directly worked on, and not a list of deals done by that banker’s colleagues.

2. The Investment Banker Has Experience in Your Industry

Choose an investment banker who has relevant and recent experience in your industry or sector. If your banker has experience in your industry, he or she may need less ramp-up time, bring a more nuanced and sophisticated understanding of industry factors determining value, know relevant industry trends, and have existing relationships with potential buyers. An investment banker lacking experience in your industry cannot match these advantages.

To discern the banker’s industry experience, ask for a sample list of transactions in your space, the banker was directly involved with, and then discuss the particulars. Measure the depth of industry knowledge the banker possesses, especially around market-specific factors such as regulatory issues, competition, key strategic players, or technology trends. The banker might not have to be a guru in your industry, but knowing the landscape and key players goes a long way to successfully representing your company through the sale process.

3. You Understand and Like the Way They Get Paid

In the past, most investment bankers were paid the same way: they charged a monthly retainer fee (designed to help cover their costs and give evidence that the business owner was serious about selling) and then received a success fee in the form of a commission tied to the sale of the company. The success fee represented the lion’s share of the banker’s income and motivated the banker to make the deal happen. The fee was most commonly expressed as a percentage of the deal value and decreased as the deal size increased. In this manner, the total fee percentage went down as the deal size went up. The most common version of this approach was developed in the 1960s by Wall Street firm Lehman Brothers and is called the Lehman Scale or Lehman Formula.

Modifications and adaptations of the Lehman Scale are still in use today. But, in recent years, a greater variety of compensation methods and models have entered the marketplace. This development creates a challenge for the business owner because you now have to sift through a wider range of models. But, you gain the opportunity to select a compensation philosophy that is consistent with your situation and preferences. For example, some investment bankers completely inverse the declining percentages found in the Lehman Scale, replacing it with a fee schedule where above certain thresholds the applicable percentage actually increases. The logic is that the increasing percentages incent the investment banker to drive the sale price up as high as possible, generating a greater net amount for the seller. Another approach is to charge a flat fee, with little to no variability tied to the sale price. To further complicate matters, monthly retainers can greatly vary in amount from one banker to the next, and some bankers credit the retainer against the success fee, while others do not.

On this issue, meet with multiple bankers to get a feel for which compensation method you prefer. Ask the bankers you interview to explain their method and its justifications. Model the banker’s compensation method in a spreadsheet that calculates the fees at various potential sale prices. Ask your other advisors to evaluate the proposed fees, to be sure they are consistent with market rates.

4. Your Other Advisors Support Your Choice

Selling a company is a team sport. An investment banker plays the lead role in the sale process but needs help and support from the business owners’ other advisors at numerous steps along the way. You should rely on your other advisors to screen and select which investment banker you intend to use, not just to protect your interests but also to make sure that you end up with a team of advisors who work together effectively.

Perhaps the two most important advisors to lean on as you research investment bankers are your exit planner and your deal attorney. Your exit planner should be able to do all the following for you: recommend candidate bankers, research their backgrounds and qualifications, accompany you during interviews, and review their proposals. The exit planner should help you determine which banker is qualified to represent your company and at a fair price.

Your deal attorney plays a critical role in reviewing the services agreement that will govern the contractual and financial relationship between you and the investment banker. Too many business owners sign a services agreement prior to engaging a lawyer with M&A experience—that is a deal attorney. Picking your investment banker before engaging a deal attorney is backward. Select the attorney first, and have him or her review the banker’s agreement before signing it. An attorney experienced in these transactions will know how to limit your risks, protect your interests, hold down fees, and avoid contractual provisions that are not consistent with market norms.

5. You are Comfortable with and Trust the Investment Banker

This last criterion may be subjective, but it is no less important. You will be working regularly and closely with your investment banker for many months during the sale process. This person (or team) will be your constant companion, potentially through difficult and emotional matters. Achieving a successful sale will be considerably more difficult and stressful if you are not comfortable with your banker, and all but impossible if you cannot trust this professional.

Spend time carefully choosing your banker. Interview multiple choices—even if you already have a preferred banker in mind, to have different options to compare and contrast. Ask for and follow up on references. If the investment banker is part of a firm or team, verify who on the team you will be working with during the process. Get to know the person or team well, as they will be “in your foxhole.” You must have confidence and comfort in working with them.

Conclusion

Choosing an investment banker takes care and time. Expect the process of selecting your banker to take several months, starting from when you conduct your first interviews up to signing their services agreement (after your deal lawyer has reviewed it.) Then, the real work begins. Making the right choice puts you on the path to a successful sale and exit. Selecting a banker that is not a good fit for your situation can set you back immeasurably.

If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.

Fierce Conversations

By: Susan Scott

Readitfor.me Book Review Summary

Far too often in business and life things are left unsaid.

We tell ourselves that we do it to preserve the peace in our relationships. But in reality, we are afraid of what might happen when we have those fierce conversations.

The predictable end result of those undiscussibless is the deterioration of the most relationships in our lives.

In Fierce Conversations, Susan Scott gives us 7 principles and 3 tools that we can use to get back into action, and finally have some real talk in the most important areas of our lives.

What Is a “Fierce” Conversation?

Before we get into the principles and tools, let’s define what a fierce conversation actually is.

Scott tells us that a fierce conversation is one in which we come out from behind ourselves into the conversation and make it real. It’s about moral courage, making real requests, and taking action.

There are 4 purposes to having one – to (1) interrogate reality, (2) provoke learning, (3) tackle tough challenges, and (4) enrich relationships.

With that definition and goals in mind, let’s get started.

Principle #1: Master the Courage to Interrogate Reality

There’s no way around it – having fierce conversations takes courage.

But here’s the reality – most people want to hear the truth, even if they don’t like what they hear. We respond deeply to people who level with us.

Know that when you bring up an issue that everybody else has been thinking about but sweeping under the rug, most people will be relieved that somebody is finally dealing with it.

Question to consider: what reality at home or work most needs interrogating?

Principle 2: Come Out from Behind Yourself into the Conversation and Make It Real

As Scott points out, you cannot be the person you want to be, or have the life you want, unless your actions represent an authentic expression of who you really are.

“Being authentic” isn’t a personality trait, it’s a choice. And until you choose to show yourself to the people in your life, you will never have the conversations you want or need in order to get there.

Here’s a question to ask yourself to determine whether or not you are being authentic in your relationships:

Are you sharing your dark days with the people who are closest to you? We all have them.

Question to consider: Where and with who am I failing to show up authentically?

Principle 3: Be Here, Prepared to Be Nowhere Else

There is a basic human need for people to be known.

Joseph Pine articulates this perfectly in his book The Experience Economy:

The experience of being understood, versus interpreted, is so compelling, you can charge admission.

Knowing this, our goal in any conversation needs to be to help the other person feel understood and known.

Even better, you should set time aside specifically for that goal to be met. Not as an add-on to your performance or project review, but with the sole purpose of talking the other person about whatever they deem the most important.

You’ll do that by using a tool called Mineral Rights, which we’ll cover in the tools section of the summary.

Question to consider: Who would benefit from my undivided attention?

Principle 4: Tackle Your Toughest Challenge Today

One of the greatest gifts that fierce conversations will give you is the ability to tackle your toughest challenges. No longer will you punt them down the road to deal with later, when you “have more time.”

There’s a saying that a problem named is a problem solved.

So before you’ll be able to get any use out of the tools we’ll cover in the tools section, you need to have the ability to identify the issues that need to be resolved with them.

If you need to confront someone’s behavior, do not begin by asking that person how things are going or by complimenting him or her.

As Scott says, don’t surround your message with pillows. Come straight at the issue and get right to the point.

We’ll cover exactly how to do this in the tools section.

Question to consider: What conversation am I dodging?

Principle 5: Obey Your Instincts

Scott suggests that the most valuable things any of us can do is to find a way to say the things that can’t be said.

These are the thoughts that go running through our head all day while we are interacting with people.

For instance, your spouse tells you they are thinking one thing, but everything in your being tells you that they are thinking something else.

An easy way to bring this up is to say something like “Would you like to hear something I’m feeling right now?” Then, if they agree, share your thoughts.

It’s an ingenious way to get a real issue on the table without feeling awkward doing it.

Question to consider: What messages have been beckoning me?

Principle 6: Take Responsibility for Your Emotional Wake

As a leader, there are no trivial comments.

There are most certainly things you’ve said in the past that have had a devastating impact on someone who was looking for your approval without you even knowing it.

Sometimes even innocent questions like “how’s that project going” can send your team members scurrying off, reprioritizing work schedules, and starting fires without you knowing it.

The principle here is to take 100% responsibility for the impact your words have on other people, and consider your words thoughtfully before you speak.

Question to consider: To whom do I need to apologize? Who deserves my praise?

Principle 7: Let Silence Do the Heavy Lifting

Scott jokes that CEOs are the most likely people to die with their mouth open.

Leaders are often taught to communicate until their people are sick of hearing the message. And then, communicate more.

But as Scott points out, the best leaders talk with people, not at them. Communication is not just about talking, it’s about listening too.

The best way to get another person to start talking is be silent. Most people are very uncomfortable with silence, and so will speak in order to break it.

Question to consider: What beneficial results might occur if I said less, listened more, and provided silence in which to think about what has (and has not) been said?

The Tools

Now that we’ve covered the principles, it’s time to move on to the tools you can use to put them into action.

Tool #1: Mineral Rights

One of the greatest gifts we can give to the people in our lives – at home and at work – is the purity of our attention.

Scott calls this tool Mineral Rights, which is a metaphor for drilling deep below the surface.

When you first bring this up, you and the person you want to meet with might feel awkward. To help ease the tension, here’s a script you can use to set up the meeting.

Rewrite it in your own words if that makes you feel more comfortable.

“When we meet tomorrow, I want to explore with you whatever you feel most deserves our attention, so I will begin our conversation by asking, “What is the most important thing you and I should be talking about?” I will rely on you to tell me. If the thought of bringing up an issue makes you anxious, that’s a signal you need to bring it up. I am not going to preempt your agenda with my own. If I need to talk with you about something else, I’ll tag it onto the end or plan another conversation with you.”

To get greater clarity on the things that are on the mind of the people who are most important to you (you can do this with yourself, too), ask your partner to take the following steps.

Step 1: Have them identify their most pressing issue.

Step 2: Ask them to clarify the issue. What’s going on? How long has it been an issue?

Step 3: Ask them to determine the current impact. How is it impacting them? What results are being produced (or not) because of it? How is it impacting others? What emotions are they feeling about the issue?

Step 4: Ask them to determine the future implications. If nothing changes, what might happen? What’s at stake here for them? For others? When they consider those possibilities, what emotions come up?

Step 5: Have them examine their personal contribution to this issue.

Step 6: Have them describe the ideal outcome. What difference will having the issue resolved make? What results will they enjoy? What are their emotions when they imagine the ideal outcome?

Step 7: Have them commit to action. What is the most potent step they could take to move this issue toward resolution? What’s getting in their way from doing it? When will they take the first step?

Because having a conversation this deep is new for most people, there are some common mistakes that might show up. Try to avoid them.

Doing most of the talking. Don’t do that.

Taking the problem away from someone. Some people are very skilled at handing back problems. Don’t let that happen.

Not inquiring about feelings. If you don’t check in with their emotions, nothing much will change. People make decisions to change emotionally, not rationally.

Delivering unclear messages, unclear coaching, and unclear instructions. Your goal should be to deliver no coaching or messages because you are trying to get them to solve the problem for themselves. But if you absolutely must, do it clearly and succinctly.

Canceling the meeting. Don’t do it.

Allowing interruptions. Turn off everything that might distract you from the conversation. Close your door, put away your phone, and shut down your computer. Whatever you need to do.

Running out of time. Every Mineral Rights conversation concludes with clarity about the next most important step. If that next step needs to be another conversation, schedule it.

Assuming your one-to-ones are effective.

Tool #2: Preparing an Issue For Discussion

Sometimes there are issues that you’ll want to resolve as a group, or where you need the input of the group to resolve it.

Preparing for these types of meetings in the following way allows you to accurately and clearly state the issue, and makes good use of everybody’s time.

Even better, put this into a document that you can distribute before the meeting so people can come prepared.

Step 1: State the issue.

Get to the heart of the problem in no more than one or two sentences. Is it a concern, challenge, opportunity or recurring problem that is becoming more troublesome?

Step 2: Communicate the significance

You job here is to determine what’s at stake. Is it a gain/loss in revenue? Gaining/losing a new customer? Gaining/losing an employee?

Step 3: Communicate your ideal outcome

What specific results do you want?

Step 4: Give relevant background information

Using bullet points, give the information that you feel will be helpful for the group considering the resolution of the issue. How, when and why the issue began is a good place to start.

Step 5: Tell them what you have done up to this point…

Tell them what you’ve done so far, and what options you are considering.

Step 6: Tell them what help you are looking for

Tell them the result you are looking for. For instance, are you looking for alternative solutions because you don’t like the ones you’ve come up with? Or are you hoping they’ll give you feedback on what you plan on doing?

Tool #3: The Confrontation Model

Finally, we end with the confrontation tool, which will allow you to confront tough issues with courage, compassion, and skill.

The best part about this tool is that you’ll find that you are finally having these conversations because you have a strategy for them.

Part I : The Opening Statement

The first sixty seconds are crucial to a confrontational conversation. That’s why it’s critical that you script it beforehand, and practice saying it out loud.

Here’s what you should include:

Name the issue. If there is more than one, ask yourself what’s at the core of all of them.

Select a specific example that illustrates the behavior or situation you want to change. Be specific and succinct. If you don’t do this, the conversation will have no teeth.

Describe your emotions about this issue. Telling the other person how you are feeling creates intimacy and is disarming.

Clarify what is at stake. It’s critical that the other person understands why this issue is important. Scott suggests that we use the words “at stake”, and that we speak calmly and quietly – even if we are angry.

Identify your contribution to this problem. You may realize, for instance, that your contribution to the problem is not communicating clear expectations from the outset of the relationship or project.

Indicate your wish to resolve the issue. You are not firing or breaking up with anybody – it’s important that they hear you say that.

Invite your partner to respond. You want to be clear that you want to understand the issue from their point of view. This is your invitation for them to join the conversation.

Part II: Interaction:

This is a conversation, so the next step is to get a clear understanding of their side of the story.

1. Inquire into your partner’s views. When it’s appropriate, paraphrase their words so you are clear on what they are trying to communicate. Make sure your partner knows that you fully understand and acknowledge his or her position and interests.

Part III: Resolution

Finally, the goal of these conversations is to come to a resolution.

Where are we now? Ask whether there is anything that has been left unsaid, and cover what is needed for resolution.

Make a new agreement and determine how you will hold each other responsible for keeping it.

Conclusion

By: Patrick Ungashick

There once was a man engaged to be married. He had never married before, but he had seen what a happy marriage could do for people, and unfortunately, he also had seen what an unhappy marriage could do to people.

The man hoped his marriage to his future spouse would be happy and successful. So, he committed to working with a minister experienced in preparing people for marriage. The minister helped people know, anticipate, and address the issues and challenges that often come with marriage. The minister got to know the man, assessed the man’s readiness for marriage, and then gave feedback and advice to help the man enter into a happy and long marriage.

The man also wanted to share the wonderful moment of his marriage with the people closest to him and his future spouse. So, he committed to working with a wedding coordinator. The wedding coordinator designed a wedding event that would share the couple’s joy and happiness with all of the people whom they cared about, and would run smoothly without stress or unwelcome surprises.

Eventually, the man married. He and his spouse had a wonderful wedding, thanks at least in part to the wedding coordinator. And they lived happily married ever after, thanks at least in part to the minister.

This simple parable can help explain the difference between an exit planner and an investment banker, which is a common question we hear from owners who intend to sell their company. It’s an understandable question, for in many ways an exit planner helps prepare the company for sale, a sale that the investment banker is charged with making happen. But there are key differences between exit planning and investment banking, which is why it is important to think about these two roles separately. In some cases, it can make sense to work with the same firm or team to fulfill both roles, but in other cases, it’s beneficial to work with separate teams.

The man (or woman) seeking to marry is like a business owner seeking to exit, in this case, by selling his company one day. Just as the man has never married before, but he has seen good and bad marriages, the business owner has never exited before, but is aware that some exits are happy, but many are not. Exit, like marriage, changes one’s life in many ways. Being unprepared for exit can lead to significant struggles, just as being unready for marriage.

The minister (or priest, rabbi, counselor, etc.) is like an exit planner. Just as the minister is concerned with the individual’s overall best interests and happiness, so too is the exit planner. The exit planner’s mandate is to help the owner achieve his or her overall exit goals, which often includes: reaching personal financial freedom, leaving the company in good hands, exiting on his/her own terms, and having a sound plan for what to do next in life after exit. To be effective, the exit planner must get to know the owner and the company, and then advise the owner on the best plan and course of action, which may include—depending on the owner’s goals—selling the company. However, at all times, the exit planner must remain objective and committed to achieving what is best for the business owner.

The wedding coordinator is like an investment broker (or business broker, M&A advisor, etc.). Just as the wedding coordinator is focused on a singular event and outcome—the wedding day, the investment banker is focused on a singular event and outcome—the sale of the business. To be effective, the investment banker must be dedicated to the difficult and sometimes fragile process of selling the company. Selling a company is never guaranteed, not to mention selling for an attractive price and favorable terms. Just as the wedding coordinator seeks to make sure everything goes off smoothly with no critical detail unaddressed, so too the investment banker must carefully choreograph the process to minimize factors or risks that can hinder or even block the company sale.

When working for the business owner who wants to sell his or her company, a close and synergistic working relationship typically exists between the exit planner and the investment banker. The exit planner, typically engaged three to five years prior to exit, can help the business owner identify and implement tactics that will increase company value at sale and reduce risk. This tees up the company for the investment banker, who typically comes into the picture about a year before the final sale.

However, note that the two professionals, while serving the same client, do not share the same focus. The exit planner, like the minister, is focused on the business owner’s overall goals and best interests. The investment banker, like the wedding coordinator, is focused on the sale process and closing. Ideally, these two elements remain in alignment, meaning that selling the company (what the investment banker wants) is in the best interests of the business owner (what the exit planner wants). However, things can happen that bring into question whether selling the company is in the owner’s best interests at that time. Common examples include:

• The offer(s) to purchase the company is for a lesser amount that the owner needs or wants
• The offer(s) to purchase the company include terms and/or conditions the owner finds unfavorable
• The offer(s) to purchase the company come from a potential buyer(s) that the owner feels is not a good culture fit
• The business owner comes to realize that he or she is not personally ready to sell the company at that time, often because the owner is unsure about what he or she would do without the business
• The business owner grows unsure about selling the company to an outside buyer and instead seeks either an inside sale or passing the company to the next family generation

Should any of these occur, the investment banker and exit planner may find themselves working toward different outcomes. This benefits nobody, especially the owner. Experienced exit planning and investment banking advisors know these issues and seek to minimize the likelihood that these situations occur. In all cases, business owners and their advisors need to remain clear through the entire process what role every advisor is playing.

If you have a quick question coming out of this article or, if you want to discuss your situation in more detail, we can set up a confidential and complimentary phone consultation at your convenience contact Tim 772-221-4499.