How you're going to leave a business isn't often part of the planning process for starting one, but it's a question that distributors have to tackle eventually, according to Brent Grover in Endgame Strategy: A Must for Distributors. And while family succession used to be a given, that's not always the case anymore.
"Some founders designed their companies around the kitchen table just because they were unemployed and no one would give them a job," Grover notes. "These early stage businesses were all about survival."
But as distributors became more established and successful, business operations often became more complex; tax laws, the company's corporate structure and even the level of family member involvement all need to be considered when developing an exit strategy.
A good starting point is developing a long-term vision for the company. What do you want the company to look like after you're gone? You've spent your life and put so much blood, sweat and tears into this company, now you need to think of what you want your legacy to really be. And communicate that to other key players in your organization. If you keep it to yourself, that vision will leave the company with you.
You may not always have complete control over when a transfer of ownership takes place, either. You may get an unsolicited offer from a qualified buyer that's simply too good to turn down. Or industry conditions may drastically change. New competitors are constantly entering the marketplace. All these factors may impact your "when" to sell.
The best time to consider your exit strategy is now – even if you don't plan on exiting at any point in the near future, Grover says. You can always adjust an existing plan to adapt to new considerations, but if you don't have a plan in place, you may miss the perfect opportunity when it arises.
Read more about how to create an effective exit plan in Endgame Strategy: A Must for Distributors. This article is an excerpt from Mergers and Acquisitions for Distributors: Expert Advice for Buyers and Sellers, available from NAW.