By: Patrick Ungashick

Legacy. This single word causes business owners more emotion when they are preparing for exit than any other single word. Few owners would define an exit as being “successful” if somehow their exit failed to uphold strongly-held values and beliefs. Legacy is hard to define. It means different things to different people. Yet it is immensely powerful. Many owners surprise themselves by how important legacy becomes a vital motive once they get close to exit. Legacy is so powerful that it can veto price. For example, many owners are willing to accept a lower purchase price for their company if it means making sure their employees, customers, and brand are treated better by that particular buyer.

It’s imperative to determine what is essential to you about legacy before you intend to exit when there is time to plan and implement steps that will achieve your success. (Read this article about why all business owners should start their exit planning five years prior to exit.) Waiting until shortly before exit to figure out what’s significant to you narrows your options and usually increases your stress. For example, many owners have some employees they want to thank once they exit, generally with significant bonus checks. Who to thank? How much to spend? Who gets what? These are some of the common questions that keep owners awake at night — owners who wait to address this until shortly before exit always stress with these decisions. Those questions are difficult to answer at any time, and even more challenging when you have dozens of other things pressing on you shortly before exit.

Figuring out your legacy wishes takes time and reflection. To help you get started, download this free white paper, The Three Laws of Legacy. This insightful article can help you identify what will be relevant to you about legacy—well before you reach 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

Five conversations can put you on the path to a happy and successful exit. These conversations need to be open and honest, revealing your desire to exit the business eventually. They need to be handled intentionally and carefully, with preparation and practice, because there is a real danger you may do more harm than good. Ideally, the conversations need to happen well before you exit (we suggest about five years,) when you still have time to take the right advice coming out of these conversations and put it to use. Waiting until just before you exit to have these conversations negates the opportunity for positive action arising out of them, and risks alienating people who care about you and the business, and feel disrespected for not being included much earlier.

The five conversations are with the following relationships:

1.Yourself

2.Your spouse or partner

3.Your business co-owners (if applicable)

4.Your business co-leaders

5.Your advisors

These five relationships are critical for your exit success. How you approach these relationships—through the conversations you have with them—will go a long way to determine if you exit happily or not. As long as you have not disclosed your exit aspirations with these key relationships, you cannot be entirely honest with them for fear of creating potential problems for you and your company. Your ability to lead the business and work effectively with these relationships will be compromised. You will find yourself making critical exit-related decisions that impact the business, partners, employees, customers, key suppliers or advisors, and your family, keeping them in the dark about your intentions, and where you are trying to lead things. Misalignment, tension, friction, and frustration are nearly certain to ensue.

The longer you wait to have these conversations, the greater potential your exit success will be undermined, or you may even cause harm to your relationships with your business partners, employees, customers, and family members. The business may suffer. Millions of dollars may be lost. Consider the following real examples we have encountered, all of which occurred because of business owners who never had a productive exit conversation with these relationships:

• The two business partners who, after 14 years of working together in friendship, found themselves unable to be in the same room out of anger and hurt, because they could not learn how to effectively talk about their future exit.
• The business owner’s wife, sitting in a conference room in our offices, crying out of fear. After thirty years of owning their business, nearly all their wealth was still tied up in the company, and her husband was unwilling or unable to tell her when they would end their financial dependency on the business.
• The three siblings who co-owned a second-generation family business, who prematurely sold the firm because they never learned how to have the exit conversation with each other.
• The two key employees who left the company they cared about as much as the owner, feeling unappreciated and disrespected because they suspected the owner would sell the business one day, but had never confided in them nor approached them about potentially buying it.
• The business owner who did not feel comfortable sharing his future exit intentions with his accountant, and without that information, the accountant failed to recommend a corporate structure that would have reduced taxes at exit by more than five million dollars.
• The business owner who sold his business when a surprise buyer showed up and wrote a large check, even though the owner never had this conversation with himself about his exit goals and values. Only to watch the buyer subsequently treat his former employees and customers poorly to the point that for the rest of the owner’s life, he felt like he had failed those people.

Conversations with the five relationships will not guarantee you a happy and successful exit. However, if you fail to have the conversations with these five relationships, your exit likely will be more stressful, riskier, and costlier than if you have the conversations. To plan these communications takes a modest amount of time. In return, you may create thousands to millions of dollars in increased net business value, years of continued good relationships, and uncountable benefits in reduced stress and avoided problems. On a dollar-for-hour basis, these conversations may be the most valuable time you spend during your entire career as a business owner.

To get started, review this helpful information about the 14 most common exit planning questions. Then, contact us to discuss your specific situation.

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

One of the most common mistakes owners make in their exit planning is negotiating with only one potential buyer for their business. Rarely, this works out fine, and the business sells for the desired price. However, more often than not, negotiating with only one potential buyer at a time undermines your exit success—sometimes without even knowing that you lost something.

Here are five reasons why you may come up short if you only talk to one potential buyer at a time:

1.You don’t know if you are talking to the buyer who will pay the highest price.

For most businesses, there are multiple potential buyers out there. Within the universe of potential buyers, some will be more motivated than others to acquire your company. Remember—the buyer’s motive makes the multiple. So, unless you happen to get lucky, the simple odds are that you are not talking to the most motivated potential buyer for your business. Making matters worse, you have no way to recognize if you are talking to the best buyer or not without other potential buyers in the conversation.

2. You also don’t know if you are talking to the buyer who is the best fit for your company.

When selling their business, most owners seek more than just the top price. If you are like most owners, when you go to exit, you will prefer to sell to a buyer that is a good fit for your organization, a buyer that will continue your culture, treat employees fairly, and serve customers well. Again, unless you happen to get lucky, the odds are that you are not talking to the best fitting buyer. And, here too, the only way to know is to include other potential buyers in the conversation.

3.Talking to just one buyer eliminates any competitive pressure in your favor.

If you are negotiating with only one potential buyer, that party knows it has no competition to acquire your company. It has no incentive to put forth its top price or most attractive terms. It has nobody bidding against it. Even if you believe that you want to sell your company to this one buyer, you don’t have a second buyer to create any pressure. Consequently, you have little leverage within the negotiations. Without other potential buyers in the picture, the one potential buyer is mostly free to set the price on its own, dictate the process and timetable, and secure an outcome favorable to itself. The whole situation validates the old saying, “In a potential negotiation between one party with all the money and another party without any, the party with the money will win.” Most potential buyers have a lot more money than you do, and if it’s just you and one buyer in the negotiation, likely they will win.

4.You have little to no protection during due diligence.

During the due diligence phase, some potential buyers look for opportunities and justifications to lower the final purchase price. (This is called “retrading” the deal.) You can attempt to negotiate with your potential buyer to keep the price up, but you have little leverage short of walking away from the negotiations, and your potential buyer will know this. It is easier said than done to walk away from a deal once you are this far along because you will have months invested in transactions, as well as tens of thousands of dollars in expenses and endless emotional capital. With just one potential buyer in the picture, you are at a disadvantage all through the process, but especially during due diligence.

5.Getting your deal done may take more time and present greater risks.

Without competition, your potential buyer feels little pressure to get the deal done. This leaves them in control over timing. The longer your sale takes, the higher the risks for you. For example, something could happen, which gives the potential buyer leverage to lower the price, such as your business misses a monthly sales forecast. Or, a customer or competitor could learn about your potential sale before you are ready. Time is the enemy of all deals. As time increases, the effort and cost you have invested in this possible deal increase, making it harder for you to walk away—a vulnerable position for you. Potential buyers know this, and use it to their advantage.

Your Exit Plan and Selling Your Company

With few exceptions, business owners seeking to sell their company at exit are better served by working with advisors who will run an organized process that confidentially brings multiple potential buyers into the picture. A competitive process creates positive price pressure, increases your options, and likely leads to exit success.

At NAVIX, we have helped hundreds of business owners plan for and achieve successful exits. To learn more about what goes into an exit plan, start here. Or contact us with your questions.

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