By: Patrick Ungashick

Okay, okay, it seems like everybody has used the “like a box of chocolates” metaphor at some point. But in honor of the 25^th anniversary of the movie Forrest Gump (yes, it’s been 25 years!) we are taking our turn. As the full saying goes, “Life is like a box of chocolates. You never know what you’re gonna get.” Planning and preparing for exit is like a box of chocolates in that you too will not know “what you’re gonna get” until you lift that lid and take your first bites. Some of the flavors and textures will pleasantly surprise you, and some you will find distasteful to put it politely. As the owner and leader of a successful company, you probably don’t like a lot of surprises, especially ones that leave you wanting to spit.

Most business owners will only exit once, and therefore have only one shot at success. Because of this, it is imperative to minimize surprises in the process, because anything that catches you off guard can increase stress, raise costs, and undermine or even block your exit success. As a box of chocolates is full of surprises, so too will be your exit. Listed below are ten common exit surprises, followed by a free educational resource on how to avoid each.

1.Your Company Might Not Be Worth What You Think It is

Determining the value of a company is difficult and subjective in nearly all situations. Too often, what you think it is worth will be significantly different from what a potential buyer thinks. Many business owners are unfamiliar with some of the key factors that drive business value and get surprised by what’s important to buyers, and what’s not. Click here to start with our educational articles on what you really need to know about business valuation.

2.If You Sell Your Company, You May Care More About Terms than Price

When exiting, it’s understandable to focus heavily on the total price your company may receive upon sale. However, you may get surprised to learn that terms will be just as important to you—and perhaps more important than price. Most commonly, how much cash is in the deal may matter and determine to whom you sell more than the total sale amount. Read here to understand why.

3.Legacy is So Powerful It Can Veto Price

Many exiting owners are surprised to discover late in the exit process that their legacy aspirations are just as important to them as their financial goals. In some cases, legacy is so important it vetoes price—meaning you might end up picking the buyer who did not offer the highest price but instead offered a good price plus a strong fit with your values. Many if not most owners are not fully in touch with the legacy goals they want to achieve at exit—start here to begin exploring this critical topic.

4.Exiting Changes Things at Home Way More than You Might Expect

Perhaps the biggest surprise for many owners occurs after you exit, and it happens at home. Exit often radically changes personal lives: family routines shift, social relationships develop, personal financial pictures are redrawn, and so on. Many owners and their spouses are caught off guard by these changes, which can be disorienting no matter how much you sold the company for. This free and previously recorded webinar helps prepare you for what to expect.

5.Reaching Financial Freedom Ain’t Easy

The number one goal for most owners at exit is to reach financial freedom—meaning working is a choice and not an economic necessity. Reaching financial freedom and staying financially free after exit is not easy, regardless of how large and valuable your company may be. First, you have to clear enough money at exit (after considerable costs and probably the largest tax bill you’ll ever pay), and second, you will have to manage and invest that money sufficiently well to replace all the income you enjoyed prior to exit. Many owners underestimate what is required here. To learn more, start with this helpful article.

6.Getting Ready for Exit Takes Way Longer than You Expect

This may be the most commonly encountered surprise on the list—preparing yourself, and your company for the future exit takes far longer than you expect. Typically, there are dozens of issues and projects (some large and some small) that need to be evaluated and addressed to prepare you and your organization for the actual exit event. With most of these issues and projects, you and your leadership team will have little to no experience because you’ve never exited before. All of this work must be done on top of running and growing your company—in essence, you will have two critically important jobs at the same time. To help, download this free ebook.

7.To Exit Successfully, Do Not Go Out on Top

Our society preaches “going out on top.” Yet to many owner’s surprises, this does not often apply at exit. It may be advantageous not to exit on top, but rather before the company reaches its next performance peak. Buyers want a company that has not peaked, but instead still offers a credible, sustainable upward growth trajectory. It is difficult to time this properly, and even more challenging to exit from a company in the middle of a profitable, fun, and exciting growth period. To better understand why, read here.

8.The Actual Process of Selling a Company is Full of Surprises

If you have never sold a company before, you will encounter unfamiliar and sometimes unwelcome surprises at multiple points along the way. You cannot afford to be unprepared, especially when your buyer is more experienced and knows how to use its knowledge against you. This article will help you minimize the surprises and lead you into the process less blind.

9.Your EBITDA May Not Be What You Think It Is

One could argue that your EBITDA, once properly adjusted, is the second most important number you need to know to exit successfully. However, many owners get the nasty surprise of realizing (sometimes late in the process) that their EBITDA is misstated or adjusted incorrectly. This concise article explains why so that you are not caught off guard.

10.Exit Impacts Everything

Often, when owners first start to think about exit, they immediately consider the financial aspects and opportunities. Then, frequently thoughts turn to key people and ideas for what one might do next in life. Those are just some of the issues and people exit impacts. In fact, your exit will affect or change nearly every aspect of your business and personal life. Start your exit planning here to avoid getting surprised by any overlooked item.

Exiting successfully is too important to leave things to chance, or to risk biting into some revolting coconut-boysenberry nougat chocolate morsel. Take the time to be prepared and work with advisors who have helped other owners exit successfully.

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

If your exit strategy is to pass your business down to a member of your family, you face a unique set of issues, different from business owners who plan on selling their company when they exit. Woven into these issues are family dynamics, relationships, and realities which can at the very least complicate matters, and at worst prevent a successful exit. In our experience, there are seven conditions that you must address to successfully and happily pass a business down to the next generation. Reviewing these conditions helps you evaluate how prepared you are to pass your business down to family.

1^st Condition: The Company Must Run without You

If you intend to pass your business down to your children and have the business not just survive the transition but thrive going forward, then the company must be able to run without you. There are two sides to “running without you.” The first deals with processes: all the company’s essential day-to-day operations including sales (from lead generation through closing), delivery of products/services, finance, problem-solving, etc. must operate effectively without your involvement. The second aspect deals with people: all critical internal and external relationships must conduct without your involvement and presence. If the company’s important processes or people relationships cannot function without you, then you cannot pass it down to your children without risking disaster.

Creating a company that runs without you is not easy. Building a team of sufficient caliber to run and grow the company without you takes years of planning and work.

2^nd Condition: Your Child (or Children) Can Run the Company

Because the first condition is that the company must be able to run without you, the second condition must be that your child (or children) can run the company. It’s not enough to have hard-working, smart, mature children just working in your family business. One or more of them must have the talent, vision, and drive to lead the company today and into the foreseeable future. Finding successor leadership of this caliber is hard anywhere—finding or developing the leadership of this caliber within your family can be even more challenging. Also, it is important that your exit and succession planning build time into the process to let your children demonstrate that they can run the company before fully turning it over to them. They will need the opportunity to prove to you, other employees, customers, lenders, etc. that they have earned the future leadership role, rather than received it due to nepotism. (See the 5^th Condition below.)

3^rd Condition: Your Children are Prepared for the Risks of Ownership

Your children must be more than just qualified and proven to run the company; they also must be prepared for the risks that come with owning the company. Business ownership carries inherent risks, and in many family businesses, the successor children are unfamiliar with these risks and have never had to shoulder their responsibilities. For example, if you personally guarantee the company’s line of credit or other financial obligations, your children may be unfamiliar with this obligation and lack sufficient personal wealth to meet current and future credit requirements. Your children also may have never experienced owning the company through difficult economic times, such as a recession or industry downturn. It is not possible to protect your children from every business risk, but the key question is, are they prepared to handle the risks that you know come with ownership.

4^th Condition: The Rest of the Family Supports the Succession

One of the great challenges within most family-owned and led companies is getting all the necessary family members on the same page while avoiding decisions or actions that cause dissention and strife. When it comes to passing a business down to the next generation of family leaders, preventing dissention often gets much harder, as most if not all family members are impacted in some manner by this event. For example, if you have some children working in the company but some who are not, then treating all your children fairlymay be difficult if only some children are going to “get” the business while others won’t. These issues can be emotional and sensitive within the most tight-knit, close families. Add into the picture complicating factors like second marriages or adult-age children who are not acting like adults, and fulfill every family member’s wants, and needs may seem impossible. Again, the sooner family-led companies start talking about and addressing these issues, the more time they give themselves to achieve a successful outcome.

5^th Condition: The Rest of the Company Supports the Succession

To pass a business down to your children, your family must ultimately support the exit and succession plan, and the rest of the company’s key leaders must support it too. To the extent, you have addressed the 2^nd and 3^rd conditions described above, likely you will secure the support from the company’s non-family key employees because they will have seen your children effectively running the company and qualified to be owners. However, if you have co-owners (business partners) outside of your nuclear family, gaining their support may be more complicated no matter how qualified your children may be. Typically, your partners will not want to see the business that they own a portion of being passed down to your kids, either because they want their children (if applicable) to have the ownership opportunity, or because they want to sell the company for an attractive price. In these situations, the simplest solutions (share the company between everybody’s kids, or buy out the other owners) are rarely simple to implement.

6^th Condition: You Can Reach Financial Freedom without Over Burdening the Company

Most business owners are financially dependent on the company. To some degree, you need your income from the company to support your current lifestyle, and one day you will need to convert some to all of your business wealth into personal wealth to reach financial freedom and retire. You can’t happily and successfully exit and pass your company to your children if that cuts you off from your financial security.

Owners who exit by way of selling their company to an outside buyer have an apparent mechanism for how they will reach financial freedom—the liquidity event created with the company sale. However, if you intend to pass the company to your children, there usually will not be a liquidity event. Alternative mechanisms, such as the company/kids borrowing money to buy you out, or the company keeping you on the payroll indefinitely, can help you reach financial freedom but they create significant long-term financial burdens (and sometimes tax problems) for the company. Ideally, family members will recognize and start addressing this issue long before the current owner(s) want to exit and adopt tax-favorable strategies to build wealth outside the company long before you are ready to exit.

7^th Condition: You Have a Plan for Dealing with the Taxes

Passing a business to your children triggers potential transfer taxes—commonly gift taxes (if the transfers occur while living) and estate taxes (if the transfers occur at death). A high tax bill can cripple even the soundest succession plan. Recent tax law changes provide some tax relief, but only through 2025. After that year, the potential taxes owed on asset transfers are scheduled to return to significantly higher levels. You must consult your tax advisors to determine your situation, and if you need to consider taking action as part of your overall exit plan.

Your Last Five Years

Preparing and implementing an effective plan to pass a company from one generation to the next requires a thorough review of the company and the family, followed by discussions, brainstorming, modeling, and assistance from experienced advisors. In other words, exit planning takes time and work. If you are telling yourself you want to exit sometime in the next five years, now is the time to take action to address these seven conditions in your family business. For help, download our complimentary ebook Your Last Five Years: How the Final 60 Months Will Make or Break Your Exit Success to get started.

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

“Unlike a marriage, business partnerships are supposed to end.” Attorney William Piercy offers this insight in the opening chapter of his book Life’s Too Short for a Bad Business Partner. Piercy, with the law firm Berman Fink Van Horn in Atlanta, Georgia, is a specialist in resolving and dissolving unwanted business partnerships—an area sometimes called “corporate divorce.” Many business owners have unspoken expectations that their relationship with their business partner(s) will last forever when, in reality, those affiliations are not intended to be perpetual. All business partnerships should one day end, hopefully with a successful exit featuring the “partners departing as friends with full bank accounts” as Piercy observes. In the real world, this does not always occur. Many business partnerships fail, some quickly and others after an otherwise long and successful collaboration.

In his book, Piercy identifies ten reasons partnerships can fail. Knowing these can help you avoid a breakdown in your business relationship, or perhaps recognize that it may be time for your partnerectomy. Listed below are Piercy’s ten reasons, along with some of our experiences that corroborate the author’s observations.

One: Lack of Communication

“When dialogue breaks down, bad things happen,” Piercy writes. Communication breakdowns among business partners are, unfortunately common. One contributing factor is that many co-owners do not consistently allocate time to meet and address ownership issues—shareholder-only meetings are held sporadically or never at all. This bad habit inevitably leads to communication breakdowns.

Two: Lack of Transparency

In healthy business partnerships, there must be a division of labor, which usually means that some partners have a more regular need than other partners to interact with data like, financial records and reports. This may be necessary for day-to-day operations, but all owners must have consistent and unrestricted access to important company operational and financial performance data. When this is not the case, that is when partnerships can get into trouble as accountability, communication, and trust erode.

Three: No Shared Vision

If the business partners are not all rowing the boat in the same direction, Piercy forecasts, “rough seas are ahead.” After many years of close alignment, different business partners may develop diverging plans and aspirations for where to take the company. Exacerbating this, many companies operate with only loosely defined, unwritten strategic business plans. Without a shared, formal business plan with clearly defined goals and tactics, each owner is free to row the boat in whatever direction he or she feels best.

Four: No Clear/Defined Roles

Piercy notes that in a “startup culture…founders roll up their sleeves and do whatever needs to be done”. However, with time and company growth, owners need to divide and specialize their roles in the organization. Sometimes this occurs smoothly, but within some teams, it leads to overlap or gaps. When partners allow themselves to work in the company without written job descriptions governing their roles and responsibilities, this issue is more likely to occur.

Five: Failure to Stay in Your Lane

Even if each partner’s roles have been defined, sometimes a partner strays and engages in behavior that disrupts other people or processes in the company. When this occurs, typically the offending owner is acting with good intentions, but the disruptive behavior often goes unchecked because it’s hard for any organization to tell one of its owners to “stay in your lane.” Regardless, if this continues the partnership and business can suffer.

Six: Disparity in Contribution

When one partner is contributing (or perceived to be contributing) less to the organization: less time, effort, money, results, etc., the seeds are planted for dissent within the relationship. This awareness can be a natural progression within many partnerships. If one partner is significantly older than other(s), his or her energy and engagement may wane earlier than the other’s. If this situation deepens and the partners fail to address it, a complete breakdown may occur.

Seven: The Business Outgrows Its Founders

Piercy points out that starting a business and leading a business demand a different set of skills. Many founders struggle with recognizing the transition and making it. If one co-founder is not effective at leading a maturing organization, it can stress the relationship and the company. Small to mid-sized organizations that emphasize an inclusive culture can struggle with how to handle employees who were once effective but have failed to keep up with the company’s growth; the issue is even more challenging when the no-longer-qualified person is not just an employee but also an owner.

Eight: Failure to Hire Professional Help

“Without outside help,” Piercy writes, “entrepreneurs find themselves dealing with issues well outside their skill sets. Balls get dropped. Fingers are pointed. Relationships fray.” Some owners never fully recognize the need to hire professional management and engage expert advisors. Other owners see this need but then struggle with finding, hiring, and leading those people. Failing to field a competent team not only hinders sustained business growth, but it also endangers the partnership.

Nine: The Kids Don’t Want to Work in the Business

Within family-owned and led companies, lack of interest, engagement, or alignment can undermine business partnerships regardless of how strong the family bonds may be.

In addition to Piercy’s valid point, we, in exit planning, see additional reasons family issues can undermine business partner relations. For example, if one partner has family who works in the company, but another partner does not, the partners may find themselves advocating different exit strategies. The partner with children in the company wants the company to go to his or her kids, whereas the partner without children in the company wants to sell to an outside buyer. These seemingly incompatible exit goals can erode partner relations without a plan on how to accommodate everybody’s desired goals.

Ten: One Partner Has Baggage

“If your partner has more issues than National Geographic, it may be time to cancel the subscription,” writes Piercy. The experienced lawyer also notes that while it is noble to support a partner who is experiencing serious personal matters, everybody must protect the company and not let personal baggage bring down the partnership or the entire organization.

We once worked with a $100 million company where one of the owners had a severe alcohol problem. For years his partners bent over backward to support this person, including covering for their partner during extended absences during periods of treatment, and relapse. However, their tolerance reached its end when the partner drunkenly confronted a client. After this, the other partners regretfully knew they had to pursue a corporate divorce.

How to Avoid a Corporate Divorce, or What to Do If You Need One

While Life is Too Short for a Bad Business Partner is essential reading for the business co-owner who recognizes that he or she must get a corporate divorce, all business partners should read this concise book. It will not only guide an owner through the operational, legal, and financial steps of a partnership dissolution, but Piercy’s book too can help all partners implement sound business practices and take corrective action within a struggling partnership before it is too late.

Click here to register for an upcoming webinar interviewing Bill Piercy about this topic.

To secure your copy of his book, visit Amazon.

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.

Learn the habits that highly successful, fast growing companies embed in their business.

By: Verne Harnish

What tools do you uses to run and grow your business?

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.

Mastering The Rockefeller Habits by Verne Harnish provides a how to on mastering a one-page strategic plan. Read this review to see if this a tool you can use to run and grow your business.

Readitfor.me Book Review:

Verne Harnish is the founder and CEO of Gazelles, a global executive education and coaching company with over 210 partners on six continents.

He’s been at it for three decades, and his book Mastering The Rockefeller Habits has been used by thousands of companies world-wide to learn and apply the tools they need in order to profitably run a fast-growing company.

This book is heavy on “how-to”, which means we have a lot of ground to cover.

Let’s get started.

The Three Decisions and Three Habits

Over many years of working with successful entrepreneurs, and studying the life of John D. Rockefeller, Harnish boiled down their success into three simple habits and decisions.

The first habit is priorities. These are a handful of rules – some of which change, and some of which don’t (like your BHAG, for instance). You should have some for the company as a whole, and for each individual who works there.

The second habit is data. This is ensuring that the organization has sufficient data on a daily and weekly basis to provide insight into how the organization is running, and for what the market is demanding. Ensuring that everybody has at least one key daily or weekly metric driving their performance.

The third and final habit is rhythm – which are the daily, weekly, monthly, quarterly, and annual meetings to make sure that everybody is aligned with the short and long term goals with the business.

The decisions you need to make boil down into the following three questions:

Do we have the Right People? Are we doing the Right Things? Are we doing those Things Right?

Priorities: Mastering a One-Page Strategic Plan

As your company grows, it gets harder and harder to keep your team on the same page. The best way to do this, Harnish tells us, is to boil all of the most important things your company is focussing on into one page.

To follow along, you can download a copy of the plan here: https://gazelles.com/static/resources/tools/en/OPSP.pdf

It should cover the following items, most of which will be covered in more detail in the following sections.

Opportunities and Threats – list the five biggest opportunities and threats facing your organization over the time frame you are considering.

Core Values – these are the five to eight statements that define the “shoulds” and “shouldn’ts” that inform all decisions made at your company.

Purpose – this is the reason your company is in business. Why you do what you do. As an example, Wal-Mart’s purpose is “To give ordinary folks the chance to buy the same things as rich people.”

Actions and BHAG – this is your 10 – 25 year lofty goal, similar to Kennedy’s legendary goal to put a man on the moon.

Targets and Sandbox – the target is where you want your company to be in 3 to 5 years. The Sandbox is basically your market – where you’ll play, the product/service you’ll provide, and your expected market share in 3 to 5 years.

Brand Promise – this is the key need you satisfy for your customers. It should be measurable.

Key Thrusts/Capabilities – these are the 5 or 6 things you need in order to reach 3 to 5 year targets.

Goals and Key Initiatives – this is what your company needs to achieve this year, and the 5 or 6 key initiatives that will help you get there.

Critical Numbers – this is where you should have one or two numbers – ideally one from the balance sheet and one from the income statement. It should represent a key weakness in your economic model or operations, that if addressed, will have a significant impact on the business.

Actions and Rocks – these are your quarterly action steps.

Theme, Scoreboard Design and Celebration – create a quarterly or annual theme to bring focus to the year, and post your scoreboard where everybody can track your progress on the plan.

Schedules – determine when things need to happen. Unless activities show up on somebody’s weekly todo list, nothing gets done.

Accountability – this is where you identify which person is accountable for which particular activity on your plan.

Now that we’ve figured out what we need to be focussed on, let’s take a deeper dive into the most important areas of this plan.

Priorities: Mastering the Use of Core Values

Having a few rules, repeating them until everybody is sick of hearing you repeat them, and then making sure everybody acts in accordance with them, is how you create a strong culture.

It makes leading people much easier, and generally leads to better performance, higher employee retention, and better alignment across the company.

Once you have those core values, you should translate them into the quarterly Individual Performance Plan of each person on your team. For each core value that you have, each employee (and you) should be able to identify actions you’ll take to live it out.

Other things you can do include creating recognition awards for people who live out your core values, communicate examples of people living them out regularly, and make them a large part of your quarterly and year themes for the company.

Priorities: Mastering Organisational Alignment and Focus

Having too many priorities is the same as having no priorities.

In order to get your organization aligned with your long term goals, you need to identify the top 5 priorities in your company, and also clearly identify which of the 5 is the most important.

There are seven common leading priorities in fast-growing companies:

1. Not big enough to compete in the market;
2. Lacking a key player in a key role;
3. Your economic engine is broken;
4. Somebody else is controlling your destiny;
5. You need a war chest to compete;
6. You can’t raise money until you grow;
7. You need to scale back or you won’t survive.

Once you’ve identified your top priorities, you should put them into your Management Accountability Plan. This will ensure that each priority is assigned to somebody, that you identify the actions that need to be taken, and when they need to be taken.

Priorities: Mastering the Quarterly Theme

Now we start to focus on the nitty gritty of getting the plans into motion. You’ve probably been in a work environment where goals and priorities are set, and then promptly forgotten.

One of the antidotes to this is to make sure your team has an emotional connection to the goals so that you generate commitment to them.

There are many ways to do this.

You could do it in a big and flashy way like Mark Moses of Platinum Capital, who once rode an elephant into a company meeting because they were launching an expansion campaign and he wanted his employees to “think big.”

Or you could do it in a more conservative way like one CEO who handed out watches to his executive team that had their three Critical Numbers engraved on them. Every time his executives looked at the time, they were reminded of the priorities and that “time was ticking.”

You can also create rewards for your employees to help further motivate them to reach the most important goals. As long as the goals are clear, and they can see progress being made towards the goals, these types of group incentives work well.

Data: Mastering employee feedback

Hassles that continue to come over and over again cost your employees a lot of time. This is the kind of work that makes people hate their jobs. It’s also likely that these issues cost you a lot of customers and revenues.

The answer is to create a system of employee feedback to figure out exactly what these problems are, and a systematic process to deal with them.

To get started, ask your team a three-part question: what should we start doing, what should we stop doing, and what should we continue doing? Ask them to think about these questions from both their perspective and from the perspective of your customers.

Then, ensure that you are responsive to the feedback. Find some quick wins and cross them off the list. Make sure that your team sees progress being made on them so that they continue to provide input. It’s not enough to just make progress, they have to be able to see it.

Here are 6 guidelines to keep in mind as you continue to work through your employee feedback.

1. Relevancy – is this an important issue for us to tackle?
2. Be Specific – make sure to capture the details of each issue.
3. Address the Root – look at the root issue, not just the symptoms.
4. Focus on the What, Not the Who – focus on eliminating process issues. 95% of the time it’s a process problem.
5. Involve All Those Affected – get everybody into one room to discuss and resolve the issue.
6. Never Backstab – never talk poorly of somebody that isn’t present.

Follow those rules for gathering and dealing with employee feedback and you’ll be well on your way to eliminating your thorniest recurring problems.

Rhythm: Mastering the Daily and Weekly Executive Meeting

At the heart of Harnish’s system for growth are tightly run daily, weekly, monthly quarterly and annual huddles and meetings. He suggests that these meetings should all have specific agendas, and should happen without fail.

Here are the meetings he suggests you should have:

The Daily Meeting

In a growing company, everybody should participate in a 5-15 minute huddle, daily. These huddles utilize three of the most powerful tools you have as a leader in getting team performance – peer pressure, collective intelligence, and clear communication.

You should hold the meeting at the same time every day, and hold it standing up which helps to keep the meeting short and to the point.

Your agenda should include three things – what’s up, daily measurements (data), and where are you stuck?

The Weekly Meeting

The weekly meeting has a different purpose and agenda. You should be focussing on strategic issues, and it should last approximately an hour for executives.

The first 5 minutes should focus on good news stories from everybody.

The next 10 minutes should focus on the critical numbers in your business.

The next 10 minutes should be customer and employee feedback. Focus on the issues that continue to pop up.

The last 30 minutes should be a focus on a single big issue. It should be one of your large priorities for the month or quarter.

Finally, close with “one-phrase closes”: ask each attendee to sum up with a word or phrase of reaction.

The Monthly Meeting

The focus of the monthly meeting is learning. It’s a 2 to 4 hour meeting for the management to review progress on priorities, review the monthly P&L in detail, to discuss what’s working or not from a process standpoint, and finally to do some training.

The Quarterly and Annual Meetings

Finally, the purpose of the quarterly and annual meetings is to review the progress made on the One-Page Strategic Plan.

The X Factor: Mastering the Brand Promise

The brand promise is the key factor that sets you apart from your competition. It’s the reason that your customers keep returning to you year after year.

This is the starting point for every other executive decision. Make the right call and execute on it, and you’ll win. Choose the wrong one and you won’t.

The key here is to focus on customer needs. Not their wants, but their needs. And you need to fulfill their needs in a way that is different than the competition.

After you’ve chosen that brand promise, you need to make sure that you do everything in your power to execute on it, and ensure that you can remove any bottlenecks or chokepoints that might get in your way.

It goes without saying that doing all of this is incredibly hard. It should cause you to sweat a little just by thinking about it.

Lastly, realize that everything changes with time, including your brand promise. If the market changes, or your customers needs shift, you need to be ready to respond with a new brand promise that fills that void.

Conclusion

There is a lot to take in with the Rockefeller Habits. Most of the information you’ll have heard before, somewhere. But putting it all together and executing on ALL of it is where the magic is.

Get started building your One-Page Strategic Plan, and you’ll be well on your way to building a scalable, profitable business.

Please share this with a friend/colleague

By: Patrick Ungashick

Business owners often think about exit as an all-or-nothing event. For example, “Should I sell my company?” is a more commonly asked question than “How much of my company should I sell?” Yet in many situations selling only some of your business can achieve many of your exit goals, while leaving you owning a portion (and perhaps even a controlling portion) of your business. Here’s how.

The Basics of Partial Company Sale

Selling less than 100% of your company to an outside buyer/investor is usually called a private recapitalization, or recap for short. Any amount can be sold, and private recaps occur where the buyer acquires anywhere from 10% to 90% of the target company. A critical question is whether the buyer acquires a controlling interest in the company, meaning, of course, more than 50% of the voting stock. However, buyers who acquire less than 50% will still negotiate into the deal-specific ownership rights, called supermajority rights, that give them a direct say in strategic issues such as whether or not the entire company is to be sold. Therefore, whether or not you sell more than 50% largely impacts who is in charge of the day-to-day operations of the company.

Potential buyers include wealthy individuals, private equity groups (PEGs), family offices, and sometimes other companies that see a strategic fit with your business. Buyers will often use a combination of equity and debt when they purchase a portion of an operating company.

Advantages of Selling a Piece of Your Company

Business owners are often surprised by the powerful advantages that can come with a partial sale of their company. Listed below are the seven most common and relevant:

One: Get Cash and Reduce Personal Risk

Probably the number one benefit of a partial sale is it offers an opportunity to convert some (but not all) of your ownership into personal cash. Private recaps are often described as “taking some chips off the table” for this reason. Getting cash increases personal liquidity and diversifies one’s assets, which in turn reduces stress and risk! Partial sales additionally reduce personal financial risk by often removing personal guarantees on company debt.

Two: Keep a Portion of the Company for a Later Sale

Typically, the second most attractive benefit of a private recap is you maintain some ownership in the company to sell the rest of your ownership at a later date after the company has hopefully increased in value with continued growth. In this way, private recaps are often described as opportunities to “take a second bite of the apple.”

Three: Stay Involved with the Business…Or Not

Another powerful advantage is you can customize your involvement in the business after the partial sale. If you want to remain fully involved in the business’s leadership and management, you potentially can. Or, if you wish to scale back your participation to a purely strategic or advisory role, such as serving on the board of directors, that too is commonly done. It is even possible to completely step down from all involvement in the company management or leadership and become a “silent investor.” This benefit allows you to pursue any degree of involvement—as long as your buyer agrees with and supports the plan. Perhaps the most common scenario is selling a portion of the company but remaining involved with day-to-day leadership, especially if you intend to enjoy that second bite of the apple later in the future. (Watch our recent webinar called “Cash Out Without Walking Out” webinar to learn more.)

Four: Secure Different Outcomes for Different Owners

If you have business partners, a private recap can allow different owners to pursue and potentially achieve separate and seemingly incompatible individual goals. For example, perhaps one owner is older and seeks to sell some to all of his or her ownership, but another owner is younger, eager to stay involved, and wants to increase his or her ownership. A partial sale can potentially accommodate these differing goals, whereas a full company sale could not.

Five: Create an Equity Path for Top Employees

Another advantage of the partial sales is the ability to create an equity sharing plan for top employees who currently lack ownership. Within a partial company sale, an equity pool can be created to incentivize top employees.

Six: Gain a Powerful Partner

With any partial sale, a new business partner enters the picture—the person or organization who purchases the partial interest. Ideally, this partner brings skills, knowledge, resources, and opportunities that your company leverages into accelerated growth. In the best scenario, this new partner can revolutionize your company’s future: providing capital for expansion or acquisitions, opening doors to new markets, introducing cutting-edge technology, or injecting industry-leading leadership and experience. More modest benefits can include operating cost reductions and efficiency gains if the partner brings larger economies of scale or greater market credentials.

Seven: Achieve Your Exit Goals

A partial sale of the business can be a key tactic in exit planning to achieve your exit goals. If you are like most business owners, at exit you seek to reach financial freedom, exit on your terms, and leave the company in good hands. Whether you ultimately intend to sell the company to an outside buyer, sell to your management team, or give the business to your kids, a partial sale can secure your major goals.

Conclusion and Next Steps

Private recaps are not for every owner or every company. Buyers/investors look for consistently profitable companies that, offer strong growth potential, and have capable leadership. Another point to consider: a partial sale may receive a lower valuation multiple than might be achieved with a full sale, especially if the buyer is only acquiring a minority position. However, this potential disadvantage is offset with the opportunity to pocket some liquidity now and retain ownership for the full sale at a later date—hopefully at a higher total valuation after having grown the company to the next level.

Next time you find yourself asking, “Should I sell my company?” consider rephrasing that question to read “How much of my company should I sell?” Contact us to get help answering this critically important question.

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.