This week on the Maximize Business Value podcast, host Tom Bronson continues with Part 2 of his series, Prioritize Exit Planning NOW. Most failed attempts to exit your business can be prevented by a solid exit strategy. But more than that, a well-designed exit strategy is just good business strategy. It is a guidepost for effective decision-making in your business. Listen in as Tom lays out the case for why you need to prioritize exit strategy NOW!
Tom Bronson is the founder and President of Mastery Partners, a company that helps business owners maximize business value, design exit strategy, and transition their business on their terms. Mastery utilizes proven techniques and strategies that dramatically improve business value that was developed during Tom’s career 100 business transactions as either a business buyer or seller. As a business owner himself, he has been in your situation a hundred times, and he knows what it takes to craft the right strategy. Bronson is passionate about helping business owners and has the experience to do it. Want to chat more or think Tom can help you? Reach out at firstname.lastname@example.org or check out his book, Maximize Business Value, Begin with The Exit in Mind (2020).
Mastery Partners, where our mission is to equip business owners to Maximize Business Value so they can transition their business on their terms. Our mission was born from the lessons we’ve learned from over 100 business transactions, which fuels our desire to share our experiences and wisdom so you can succeed.
The maximize business value podcast. This podcast is brought to you by Mastery Partners, where our mission is to equip business owners, to maximize business value so they can transition their business on their terms. Our mission was born from the lessons we've learned from over 100 business transactions, which feels our desire to share our experiences and wisdom. So you can succeed. Now, here's your host, the CEO of mastery partners, Tom Bronson.
Tom Bronson (35s):
Hi, this is Tom Bronson and welcome to maximize business value. A podcast for business owners who are passionate about building long-term sustainable value in your business. Last week, we started a mini series on why every business owner should make exit planning a priority and why you should start working on it. Today. We continue that series now as investor and entrepreneurial icon, Carl Allen would say the only reason to have a business is to sell it and get paid for it. And I agree. Look, as a business owner, you should always be thinking about your next big move.
Tom Bronson (1m 15s):
The simple fact of the matter is that a solid plan to exit gives you some control over your small businesses. Future. Think about it. A solid exit strategy prevents most of the failed attempts to exit, but more than that, a well-designed exit strategy is just good business strategy. It's a guidepost for effective decision-making in your business when you're faced with a strategic decision. If it's, if it, that decision does not increase the value of your business, according to your exit strategy, you should simply not do it.
Tom Bronson (1m 58s):
Now. That doesn't mean that the additional value needs to be immediate. Some strategies take a seriously long time to realize value, but if you can't articulate that value and how it impacts your enterprise value, just don't do it. According to the state of owner, owner readiness survey published by the exit planning Institute, 74% of business owners have no exit plan. And if you're like most business owners and you don't have a strategy, a default strategy will ultimately become evident and probably not in a positive way.
Tom Bronson (2m 41s):
In fact, according to that epi study, a full 50% of business transitions are not voluntary. Let me repeat that. Half of the business transitions are not by choice it's because something happened that forced a transition. One of my mentors used to tell me that if you don't have an exit strategy, then by default, your strategy is to just die behind your desk and leave the problem for your family and employees to deal with, which is of course awesome. Right? While that might sound harsh, it is the reality.
Tom Bronson (3m 21s):
We've all heard stories of businesses that are forced to liquidate fire sale or close their doors because of some disaster, probably one of the five DS death, disability, divorce, distress, and disagreement, or the countless other risks that business owners don't like to think or talk about. By the way, if you want to learn more about those risks, download our ebook hidden risks, right on our website, mastery partners.com in the free stuff. Section here are a couple of things, a couple of real life situations that I witnessed firsthand, the owner suddenly died and left the business to a spouse or children.
Tom Bronson (4m 4s):
Who've never worked in the business, but need the cash from the business in order to live. That's a disaster. Another one, the largest customer suddenly gives notice and leaves for a competitor. And it was 50% of the business, certainly potentially an involuntary business transition here. And another one, the market suddenly changes and the company failed to adapt. So the sales are on a death spiral. The owner finally realizes that it's time to sell, but not before it's too late, probably is too late. Well, these are nasty scenarios.
Tom Bronson (4m 46s):
They happen all too frequently and I'm betting that you've heard at least one story like this, probably many more. So knowing that one, we've all heard at least one story like this, and two, the most common denominator for those few companies that actually successfully exit their business is having a solid plan to do so. Why is it that 74% of business owners have no exit strategy at all. And talking with literally thousands of business owners, the reasons can be boiled down to three major things.
Tom Bronson (5m 26s):
First, an exit is a once in a lifetime event when it's time to exit, most business owners probably have never been through it before. So it becomes a classic. I don't know what I don't know scenario, although they probably occasionally dream about some future exit. They just don't know where to start and therefore fail to actually do so. So I get the personal life of most business owners are many business owners is totally intertwined with the business. They can't even fathom what they'll do when they're no longer working in the business.
Tom Bronson (6m 7s):
These owners, haven't dedicated time to thinking about what they'll do in the third act of their lives. So they just delay the inevitable. They think to themselves, what the hell am I going to do after I sell this thing golf every day? I don't think so. So they push it off and push it off until it's too late. Third, most business owners are afraid of the word exit. They think it's a four letter word. Why is that? Why is it that business owners think that exit is a nasty little, four letter word. Let's explore a few possible reasons I've heard through the years.
Tom Bronson (6m 49s):
And that might be rolling around in your head right now. Most business owners conjure up negative thoughts around the word exit to them. It brings images of abandoning the business and the people that have sometimes spent the better part of their lives building. They think some uncaring, huge corporate entity taking them over and destroying what they've meticulously built over the years. Business owners think of losing the culture and the friendships that they've built through the years. They think of losing a sense of purpose and reason to get up in the morning. They think about the customers and the employees who might get angry because they were sold out.
Tom Bronson (7m 34s):
They've heard horror stories of former business owners who regret selling their business. Look a properly executed. Exit strategy actually helps prevent these three catastrophes and the term exit should be taken as a neutral term. If it makes you feel better about the process, call it something else like transition or transaction or succession. The simple fact of the matter is that exit strategy is good business strategy. Yes, it's not easy. Few really good things are very easy to do, but the longterm benefits make it definitely worthwhile.
Tom Bronson (8m 22s):
Next week, we're going to the exit strategy court and I'm going to present the case for exit planning and give you my closing arguments. You definitely don't want to miss that episode. This is the maximize business value podcast, where we give practical advice to business owners on how to build long-term sustainable value in your business. Be sure to tune in each week, follow us wherever you found this podcast and give us a comment or two or a suggestion for a future podcast until next I'm Tom. Brownson reminding you to start working on your exit plan today while you maximize business.
Announcer (9m 7s):
Thank you for tuning into the maximize business value podcast with Tom Brunson. His podcast is brought to you by mastery partners, where our mission is to equip business owners to maximize business value so they can transition on their terms on how to build long-term sustainable business value and get free value building tools by visiting our website, www.masterypartners.com that's master with a Y mastery partners.com. Check it out.
Tom Bronson (9m 53s):
That was perfect. I wouldn't make any changes.