Exit Strategy Planning - Essential Insurance Policy
Sunday, April 11, 2010 at 04:58PM Due to a convergence of unprecedented social and economic changes, business owners planning a divesture of ownership interest in the next 10 years must now be vigilant with Exit Strategy Planning.
Why Exit Strategy Planning Is Now More Important Than Ever Before
Perhaps more than in any previous period, significant fundamental shifts to social and economic foundations will substantially alter the value and market of small to midsize businesses during the next 10 years.
The Forces of Change
1. The changes brought about by the massive Baby Boomer Business Owner Demographic.
- What will the impact be to business values and marketability when over 50% of today's small business owners who plan on retiring in the next 10 – 15 years start to make their move?
- Are there enough buyers or even willing and qualified operators to assimilate the number of businesses impacted?
- This magnitude of ownership change has never occurred in recent history outside of a major cataclysmic period of social and economic upheaval.
2. The Implications of the Internet
- The impact on every aspect of business operation from the Internet is not leveling off. On the contrary, these changes are just beginning and the rate of change will only accelerate as the internet continues to fundamentally alter the way business is done.
3. The growing implications of Climate Change and the Sustainability Movement
- What is a sustainable business or economy, really? With climate and social change we don’t yet have a clear answer to this question.
- Will brick and mortar businesses remain desirable over the next 10 years?
- Will conventional sales and distribution channels and the businesses that populate them be as important in the future, as the net increasingly centralizes the way we access and buy our goods and services?
- Is extensive diversity and duplication of manufacturing and distribution capacity sustainable in an altered economy?
- In a slower growing or more sustainable economy, will consumerism remain the driving force of business and economic growth?
- In a shifting global economy, will the United States remain the driving force that shapes the way the world does business?
4. Generational Change
- As we know 20 – 40 year old players just entering or finding their niche in the business arena today simply do not see the world the same way older more established players do.
- What has value? How to spend time and invest resources? What's the goal of a professional career? The answer to these questions are vastly different for those just entering business today, and this difference will have a growing impact on the previous generations of business owners who will start to divest their ownership positions in years to come.
- At the very least, a generation raised on the net, with digital communications and entertainment, and instant access to global information, products and services will be hard pressed to put the same value on acquiring or sustaining traditionally styled companies.
5. Financial Underpinnings of Transitioning Business Ownership
- The existence of significant national debt will unavoidably decrease credit availability, raise interest rates and increase the tax costs associated with a change in business ownership.
- These changes will limit the accessibility to business ownership and reduce the number of business buyers in the marketplace.
Broadly speaking, what will be the likely impact from these forces of change?
- Retiring baby boomers will increasingly flood the marketplace of businesses for sale, and the market for major business assets.
- Demand for traditional Brick and Mortar business will steadily decrease.
- Rising transaction costs will reduce the number of financially qualified buyers in the marketplace.
- Predictability –what’s a valuable business today and which business will hold it’s value in the future – will be harder for anyone to establish in the years to come.
- Security, in terms of the predictable long-term investment value of a business, will be harder to come by or count on.
As an owner of an existing small business, what is your best response to these changes?
Even the smallest business owners must learn to see their companies from the perspective of a business investor.
See every product and every business unit and the business as a whole as an end product in itself - with distinct market value.
Be extremely strategic in business planning and growth. Continuously assess how your plans and projects impact the value and marketability of the business and its basic assets–especially when considering any major business expansion or development project.
Move aggressively towards flexibility and growing your company’s ability to change. Get good at change and be ready to respond to any changes in the marketplace. It’s not will major change affect your business, it’s when, how big, and how well will your company respond and capitalize on the changes that you are already experiencing, and those that are still to come.
Be actively cultivating the next generation of business owners today. Think of your employees, your customers, your investors, even your competitors as potential buyers, and actively cultivate relationships that can quickly shift towards succession, mergers, sales or acquisitions.
As you get closer to your envisioned ownership horizon, be ready to alter your business and ownership relationships and models to seize the opportunities that will arise to spin off part or all of a business.
Reader Comments (6)
Great piece. I think owners who are "waiting for valuations to rise", will be in for a huge disappointment. Today is really a sellers market compared to 5 years from now. The only difference is that capital "may" be easier to get - but who wants to bet their company on that? If you own a business today, and are not in a planning process for 2-5 years sale horizon, you will be sorry.
Great information and suggestions. Much of what you are talking about is change. Anyone who's been in business for many years has seen lots of change and if they're successful, they've made change their friend.
One of the reasons that you didn't write about is as owners get older, they get tired. If they're smart, they'll change their relationship with their business and become passive owners. If they do this, they will be able to do one of two things:
1. Ride out the poor M&A cycle we're in and sell at a better time.
2. Run their business until they either want to stop and or can afford to stop and liquidate.
Most businesses today and for the past thirty years have ceased operation through liquidation than any other method. I see no reason that this will change in the future.
Josh Patrick
www.stage2solution.com/blog
It’s a film called Hungry for You and it’s in pre-production now. I play the lead vampire. I didn’t want to be a vampire but was forced into it so I’m struggling with my vampire powers and not wanting to turn the girl I love into a vampire. The script is really great and has a wonderful storyline. It’s been fun. The creator, Linda Andersson, has a really cool comic strip of Hungry for You that she is going to release soon. It’s sort of a teaser and a way to start the marketing for the project in a bigger level.
cheap uggs
red bottom shoes
cheap uggs
UGG Adirondack
UGG Bailey Button
UGG Bailey Button Triplet Grey
UGG Classic Tall Chestnut
I want all the stuff about Season 3 and I want no more loan comments! Now-se! qxipxt qxipxt - North Face Denali.
In this modern and fashionable society, people are pursuing for UGGブーツ cool, unique, stylish and innovative. Whether it is UGGオンライン or fashion accessories all means a lot for modern society of today. Same is the case with trendy looking UGG販売. When these are UGGショップ, the excitement just gets doubled. Most chic looking UGG(アグ)カーフ are in fashion now. These are one of the favorite fashion accessories for men and women long time ago. If you have not yet tried UGG【アグ】クラシックカーディ, it's time to own one and feel the difference it can make to your personality. These are just brilliant and fabulous ugg boots sale. They are most iconic and can provide you with a new feeling and enhance confidence. The quality of cheap ugg boots is just superior to what you have dreamt of. Today owning a new and trendy looking ugg boots uk are not only meant for the wealthy people. These are now made luxurious and affordable uggs sale uk to reach out to every budget and range. You can just enjoy them by ordering UGG Ultra Short Boots online where you get the complete satisfaction and genuine quality at best possible rates. The finish, quality and designs you get from UGG Classic Tall Metallic Boots are really astonishing and you will love them all. Different styles and designs of Ugg Boots sale are now available to make your wrist beautiful. You can choose from the wide variety of discount uggs by comparing lots of perfect and stunning pieces. These ugg boots australia sale uk would be nice investments for you in long term. These ugg australia boots are brilliant and prove to be wonderful for you while it makes you stand out of the crowd. The dashing and extraordinary UGG Bailey Button Boots you get will attract every eye in a crowd and makes you feel more confident. If you are not having UGG Ultra Short Boots yet, check them out and own them now as were not so affordable ever before. You will not miss them out. Be it Christmas or Valentine's Day or any other special day that you would like to celebrate, a ugg boots cheap gift would be just perfect for any occasion. Many people think of the perfect Ugg Boots sale to purchase for their loved ones. Even if you shop for your special occasion at the last moment, you are sure to find something nice at ugg boots for cheap. cheap ugg gifts are not restricted to just your lover, you could also pick perfect for almost everyone, including your family and friends. What is so extraordinary and unusual when it comes to UGG Classic Cardy Boots is that you have an option to pick and select your own to be attached onto the of your preference. Just in the range of UGG Ultra Tall Boots, it provides options of a standard or you could opt for the obsidian. Once you select the bracelet, then you select the charms to be supplemented onto the bracelet.
As with any designer label, there will always be companies selling louboutin shoes, however when you are buying online how can you be sure that what you are purchasing is the genuine . If you are buying directly from the official louboutin sale, then you are of course going to be getting the real deal. However there are many resellers, and smaller christian louboutin store stores which may have special offers or stock a particular item which you cannot find elsewhere. Thankfully, louboutin online are forward thinking, and give the stores which they supply to online a "Certified Online Retailer" badge which they can display on their websites. If you are still unsure about whether or not the site is genuine, you could always visit the genuine louboutin boots website and do a store search for the online retailer. If they appear in louboutin pumps listings then they are sure to be an authentic reseller. If you are looking to buy some more charms to add to your lanvin pumps, but are considering buying charms which are not official then there are a few things to consider. Firstly, the Hermes handbags on sale may not fit well, either with hole being too small for the, or too big - so that the bead may move around more, causing more wear to the beads on either side. Also, are all made with silver or gold centres, which minimises the amount of wear on hermes plume worn side by side. Another make of may use harder, cheaper metals, which could scratch and damage genuine hermes plume Another make of may use harder, cheaper metals, which could scratch and damage genuine hermes wallets With the Murano hermes handbags sale, the genuine article has been heat treated to be extremely tough and durable. hermes bolide are likely to be made of cheaper materials, and are therefore more prone to chipping and damage. Genuine hermes picotin is crafted to a high standard, making this premium jewellery both desirable and practical. With such a huge range of moncler jackets available,makes the perfect gift for ladies of any age. If you are a moncler outlet collector and you are concerned about being given imitation as gifts, then why not set up a Club account, and create a wish list? moncler online can be found for less when you shop on the Internet. moncler coats are now available online for discounted prices.