Go Out of Business to Stay in Business by Chris Kelleher

I know you’re thinking: “Kelleher, you’ve really lost it this time.  How can someone stay in business if you’re going out of business?”

No, I haven’t lost what’s left of my mind. Of course, there’s no single factor that can predict business success. But, after working with really, really successful business owners over the years, I’ve found that there’s a key attitude, almost a mantra, that many have that contributes greatly to their fantastic success in business.  

Here it is: From day one, their business is “For Sale.”

No, this doesn’t mean that these very successful business owners hung up a “For Sale” sign next to their “Grand Opening” sign.  What is does mean is that truly successful business owners always start their business with two business plans, not just one.

The first business plan (which is the “traditional” business plan we all know and love) covers how to build their successful business.

But, here’s the key, the second business plan details exactly how the business owner expects to maximize their “ultimate pay day” when they “want out” of their successful business.

This second type of “business plan” is typically called an Exit Strategy.

But, you might ask, why should I worry about planning an Exit Strategy before my business becomes fabulously successful?

There’s at least two reasons.

First, planning your Exit Strategy in advance forces you to focus on your business’s ultimate goal (your “ultimate pay day”) which, in turn, makes all other planning and decision making much easier.

Second, by proactively choosing a good Exit Strategy, you avoid getting stuck with one of the Loser’s Exit Strategies such as:

The Attack Of The Killer D’s™  
(Death; Disability; Default, or Divorce)

Eternal But Terminal Family Warfare™

Mutually Assisted Partnercide™

or

The Attack Of The Killer B’s™
(Burnout, aBandon the Business and Become A Beach Bumb).

If you want your business to let you retire rich and you don’t want to face those Killer D’s and B’s, here are a few of the many examples of good exit strategies:

(1)    By 2015, my business will be able to “hum” without me being there and I will generate $350,000 a year in cash so I can move to the Caribbean and treat my company as a passive investment.

(2)    I will transfer the business to able family members in a planned and orderly fashion over the next ten years for a total buyout price of $2,000,000.

(3)    Since my family hates the business, in five years I will transfer the business to employees or management in a planned and orderly fashion for a total buyout price of $7,000,000.

(4)    After I hit $3,000,000 in sales, I will sell the business to a one of my local or regional competitors for five times net cash flow.

(5)    When I buy my tenth “Taco Tico” franchise and during the next “consolidation frenzy,” I’ll put my “package” on the market to sell to a national or regional investment concern for seven times cash flow.

(6)    If I die or am disabled, then the contracts that I already have with my trusted executives, Sue, Joe and Donna, require them to run the company for at least two years. They have an option to buy the company at any time for $7,000,000 or, if they decline, they will be paid a substantial performance bonus if the company is ultimately sold for more than $8,000,000.

As can be seen from these examples, some of the keys to a great a Exit Strategy are:  

•    Be creative but not crazy about who might buy your company;

•    Set realistic milestones and time deadlines to achieve your goals; and

•    Be definite about what you want your “ultimate pay day” to be.

Another bit of advice: Exit Strategies are not “Do It Yourself” weekend projects. Developing a strategy that is right for your business and meets your financial and personal goals requires time, attention and input from your trusted business advisors.

Again, the bottom line on Exit Strategies is this:

THE BEST WAY TO
STAY IN BUSINESS?

GO OUT OF BUSINESS!

Please note: The Attack Of The Killer D’s™ The Attack Of The Killer B’s™ Eternal But Terminal Family Warfare™ and Partnercide™ are trademarks of LFB Enterprises, Inc.

Chris Kelleher JD-MBA is a award-winning business attorney, author and speaker.  Chris was named Small Business Lawyer of the Year by The United States Small Business Administration and currently serves as the Chair of the Business Law Committee of the Missouri Bar Association. Praised in the media for his “high energy level and a great sense of humor,” Chris has appeared on broadcast and cable programs and his “plain English” articles on legal and business topics have appeared in a variety of national and regional publications.

www.TheLawFirmForBusinesses.com

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