Book Summary: Your Exit Map

John Dini has a tip for you that may surprise you: selling your company may be far more difficult than you believe.

To begin with, the supply of small enterprises for sale will significantly outnumber the number of people wanting and able to purchase them.

Even if you find a buyer, completing the transaction at a price you are comfortable with will be difficult.

To comprehend how we get here, we must journey back in time to World War II.

The Baby Boom - The Unstoppable Force

"I don't predict the future," Peter Drucker famously stated. He considers what has already occurred and predicts the inevitable outcome.

So, here's how it went down.

Soldiers returning from World War II began to produce a lot of babies... a lot, starting in 1945. Enough of them, in fact, that the US economy has grown steadily for 40 years due to the infusion of new employees and customers.

This generation, however, was not distinct simply because of its size. This generation was the first to not grow up to be carbon copies of their parents.

They were the first generation to grow up with television. As a result, they were the first to be openly targeted for marketing throughout their lives.

They were also taught differently than earlier generations, thanks in part to Dr. Benjamin Spock's 1946 book, The Common Sense Book of Baby and Child Care. It was only outsold by one book during the whole twentieth century: the Bible.

Instead of the harsh and tightly controlled approaches utilized by past generations, that book claimed that parents should organize their schedules around their children and their emotional requirements.

In effect, the Baby Boomers were the first generation to have their family life revolve around them rather than their parents. They were also the first generation to think that they could be anything they wanted to be when they grew up.

One of the things that the Baby Boomers yearned for was upward mobility. They thought it was their birthright because of how they were raised. What they did for a job, and the things they accumulated along the way were inextricably linked to their identities.

As they approached their 30s, many Baby Boomers began to see entrepreneurship as their only path to upward mobility. There just weren't enough high-powered corporate jobs available.

Boomers Create a Small Business Boom.

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Boomers went to entrepreneurship to maintain their upward mobility. They started enterprises at a rate that has never been witnessed before or since.

Between 1976 and 1986, the then-30-year-old Baby Boomers stepped up and nearly quadrupled the number of new business formations, going from an annual average of 300,000 to over 500,000.

To put that in perspective: although the United States' population has increased from 190 million in the mid-80s to 320 million now, many business launches have stayed constant since the Baby Boomer boom.

The outsourcing of family life and franchising were the two factors that allowed those entrepreneurs to prosper as a group.

Because entrepreneurs wanted to work longer hours - often into the nights and weekends - to help pay for their upwardly mobile lifestyle, family life had to be outsourced. On many occasions, both parents followed the arduous schedule.

Many routine tasks have to be delegated to other parties as a result. Meals, housecleaning, home repairs, gardening, and vehicle maintenance were outsourced. The Baby Boomers believed that if they could only hire someone to do the dull activities of daily living, they would be able to have it all.

As a result, franchising grew in popularity. These Boomers were promised a thriving business in exchange for a small sum of money upfront and a commitment to work long hours. What kinds of companies were franchised? They'd be the ones to undertake the labor that the Baby Boomers wished to outsource.

In retrospect, the formula seemed straightforward. Begin with a generation that is 50% bigger than the one before it. Increase the number of women in the workforce by 30%. Have the majority of wealth creators increased their typical week by 20%?

What do you end up with? Between 1975 and 2005, the economy tripled.

That rising tide is good until those Baby Boomers realize that selling their business is the only way to retire comfortably. And that the generation they need to market to, Generation X, isn't interested in what they're offering.

Gen X Isn't Buying What the Boomers Are Selling.

Someone from Generation X is the most probable buyer of a Boomer's owner-operated firm. Still, there are two factors to consider before getting into what that implies.

First, depending on the size and profitability of your firm, there are distinct groups of purchasers for mid-market and large enterprises.

Second, today's Millennials are poor candidates for business purchases. Because of the Great Recession and Millennials' debt over the last decade, they will not be a significant player in the acquisition market for at least another decade. For many of the retiring Boomers, that will be too late.

So, if you want to sell your company, the first step is to figure out who you're selling to. And Gen Xers are diametrically opposed to Baby Boomers.

To begin with, they place a higher value on work-life balance. Their employment is something they do to live a happy life. Life and work are sometimes indistinguishable for Baby Boomers.

They also have various goals in life. Not an upwardly mobile lifestyle, but personal satisfaction is their first focus. This implies that hard effort, expected in most owner-operated firms, is at odds with what they value most.

If they don't have what they desire, they resort to easy credit rather than working harder or longer. As a result, living paycheck to paycheck has become commonplace. What does this mean for Boomers looking to sell their company? They may have to become the lender of last resort to close a deal in numerous circumstances.

Then there are the obvious demographic variables, such as the fact that there are just more Baby Boomer sellers than Gen X purchasers.

There's also the gig economy. It was created for a generation that values independence and allows people to live without the dangers and difficulties that come with owning a business.

Everything we've discussed thus far, in summary, has led us to the following conclusion: selling your company may be more difficult than you believe.

Fortunately, there is a technique to dramatically improve your chances of selling your company for the price you want to the buyer you want. In the time frame you want. It's referred to as Exit Planning.

Exit Planning - Winning Starts With a Plan.

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Let us now turn our attention to some excellent news.

The good news is that most Baby Boomers are badly unprepared to sell their company. That implies that properly prepared people will have a far better chance of finding a buyer and getting a reasonable price.

Let's start with a definition of what Exit Planning is. Dini provides us the following description:

Exit planning is the process of a business owner devising a strategy for what may be the most significant financial transaction of their life... the sale of the company.

That method might be a familial succession to the following generation. It may be a sale to staff. It might be a sale to another entrepreneur, a competitor, or a larger corporation. It may be necessary for some circumstances to dissolve in a controlled manner.

Tax, legal, financial, operational, and risk assessment knowledge are required in each situation. No practitioner possesses all of the necessary information for every area of the strategy. In the proper meaning of the term, exit planning is organizing all of those talents to achieve a single goal.

When Baby Boomers were the primary purchasers, you could contact a business broker and get your company sold fast and easily. Those days, however, are long gone for all of the reasons we've already discussed.

Nowadays, selling a business is akin to custom-building a home. To ensure that the house is completed on schedule and on budget, you'll need to employ a general contractor to oversee and coordinate all of the trades.

In a business sale, an Exit Planner is your general contractor. The trades include estate attorney, accountant, business attorney, financial planner, business valuator, and business growth expert.

Yes, this really is the good news. The more complicated, time-consuming, and difficult the process is, the fewer people will actually do it. And when you do, you'll be well-positioned to sail off into the sunset - preferably on your brand new yacht.

Getting Your Business Sold

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Here's what you need to do to get the most money for your company out of this sale.

Triangulate

The first thing you need to do is sit down and triangulate three points right now if you haven't already.

The first issue to consider is your current financial situation. This fairly simple process should incorporate your stock portfolio, income property, and other assets. This stage should not include your company.

The next step is to figure out when you want to retire.

The third point is the quantity of money you'll need to retire and maintain your lifestyle for the rest of your life on our wonderful planet.

This will serve as a wake-up call since while most entrepreneurs have an idea of how much they'd like to sell their company for in the back of their minds, they seldom have a plan in place to get there.

Valuation

The next step is to get your company valued right now. If you don't, you'll have no clue how much money you'll need to retire. There are several methods for valuing your company. You probably don't know which one is most appropriate for your case.

It's vital to realize this right now. The last thing you want is to sell your firm only to discover that you overvalued it by a factor of two, preventing you from retiring. Many owners will make this error, but not those that approach it with useful information.

You now have a clear picture of your deficiency and the metrics you'll need to close it.

Growth Strategies

If your company isn't currently meeting your goals, it may be time to expand. Dini believes that the greatest approach to building your business is hiring a growth specialist to help you get there.

Work with them to grow your business in a systematic way to accomplish the goals you set in the previous phase.

Identify Buyers

Once you've met your growth targets, it's time to find a buyer. You may sell to another firm in your field, a professional investor, a strategic buyer, or even your own workers.

Each has advantages and disadvantages, and you should weigh them all as part of your due diligence.

Pulling The Trigger

There are several factors to consider when you finish the transaction. What strategy will you use to exit the company?

Are there any difficulties you'll have to deal with after the sale? What kinds of confidentiality provisions should you be aware of? What is the best way to inform your workers, vendors, customers, and lenders about the sale?

Conclusion

Selling your company might be a difficult task. But if you start now, you can make it easy.

It will most likely be the largest financial transaction you ever make. And there are other factors to consider that we won't be able to address in this quick overview.

You should do two things next if you are serious about selling your company.

First and foremost, get a copy of this book. Second, start really considering who you want on your Exit Planning team. It might spell the difference between retiring comfortably and looking for new employment.

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