Category Archives for "Exit Strategies"

Why Do You Need Exit Strategy in Your Business ?

What are your long-term and short term goals for your business ?

Veteran entrepreneur Celeste Hilling, CEO and founder of 10-year-old lifestyle company Skin Authority, stumped me with this question a few weeks ago, but she definitely left me with something to think about. When I started Deborah Mitchell Media Associates a few years ago, I was primarily concerned about getting it up and running, but Hilling explained that an exit strategy should be a part of every business plan.

“At the start of your venture, have a plan for how you want to exit or transition from the business. This will help you be clear in your focus, share a clear vision for your staff and navigate times when you are confused,” Hilling says. “You can use the end game as your compass. Does this decision put you within reach of your end goal? Do you want to sell the business to a public company, use it to produce cash for your lifestyle or create a legacy for your children’s future? This decision will help direct your path in channels, distribution, brand profile, partnerships, media, etc.”

It turns out, without a detailed exit strategy, I have been working harder, not smarter, with no real plan for the end. Over the years, I have made several changes in terms of the vision for my business, an evolution that is not uncommon.

“This is very normal. Laura and I started DigitalFlash about five years ago and have narrowed the focus many times over the years,” says Sara Walker-Santana, co-founder of the digital agency DigitalFlash. “In the beginning, you want to say ‘yes’ to everything, but over time you realize this can hurt your business more than help it.”

Saying yes to everything is often tempting, especially when you are trying to grow a business. But saying no and offering a defined set of services could be a better route to go.

Walker-Santana says that “finding the one or two things your company excels at and that you enjoy doing, most of the time, is the way to go. You and your clients will be happier.”

Need help refocusing your business? Consider hiring a business coach and explain that you are interested in also developing an exit strategy for both the short and long term. In the meantime, Hilling shared a few tips for any business person planning an exit strategy:

1. Reassess your business.

Have a six-month plan. Again, what is the end goal for your business? Do you want to sell it or go public? With your exit strategy in mind, reassess your business every six months.

2. Is your goal still relevant?

As social media and technology make data available in real time, the business landscape is quickly changing. Are all of the indicators driving toward your end goal? What has changed? Is your goal still relevant to the competitive landscape?

3. How is your brand appeal?

Test your customers, suppliers and partners for their perceptions of your brand and standing. Use the data you collect as input, but factor in your gut perceptions and perspective for the final decision.

“There’s nothing quick about being an overnight sensation. However long you think it will take, double it. Whatever cost you think, double it,” Hilling says. “Don’t be surprised that it will take you at least five years, eight to 10 years on the average, to get to the end game. Make sure you have staying power in both cash and positive motivation.

-ENTREPRENEUR

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4 Ways on How to Develop a Better Exit Strategy

In the beginning of your business and building your company must be truly focused on creating good product or service as well as generate revenue. But, when they had reached on a certain stage they want to acquired, they starting not getting their house in order. They only focus on one aspect and believe the rest can be taken care by itself.

Companies that only focus on one area and neglect the others are not good acquisition targets. Acquirers care about everything fro contracts to HR to sales pipeline. Now, here are the four ways to be a better acquisition target:

1. Avoid the “Super VP” trap

Many CEOs come from functional area of business as example, marketing, sales or engineering. The temptation of CEO role is to continue to focus on what they know and do best. For example, CEO from sales sometimes jump in to close a big deal but it may be useful at times but spending to much time in one area, in other words “Super VP” totally a quick way to failure.

Acquirers are looking to minimize risk. When one area of business is poorly run, it increases the risk for the acquirer.

2. Build mature system and processes.

In early organization’s founding, entrepreneurs had to make up for the lack of processes and system with talents. This is only temporary and somewhere north 25 to 50 employees, when the business is starting to take off, entrepreneurs need to put the “engineer’s hat” and invest in more sophisticated system and process that can help to run the company more efficiently.

Sometimes, CEO think they can get by without knowing their proper business system and processes or maybe they don’t want to spend money. Other times, the business is growing fast that the system and procedures can not keep up. So, failure to do so will inhibit the growth and the ability to attract potential acquirers.

3. Strive to be world – class in every department

Just simply buying new software is not enough. CEOs have to make a priority to make sure every department functions at the world-class level. They need to work closely with the executive team to determine the key process in each area of business and then take a systematic approach to improve each one.

Some companies will have a COO who may take primary responsibility for this work. If not, the CEO should regularly review metrics and focus on the processes that make the biggest difference to the business. Leaving this role entirely up to the members of the executive team means the CEO often won’t have the knowledge needed to make effective decisions when issues escalate and all of this starts with hiring the best people possible at every level in the organization.

4. Get the financial side of the house in order

Every department is important, but prospective acquirers who cannot make sense of company’s finances will make a low ball offer or quickly walk away. CEO advisor Bob Barker of 20/20 Outlook recommends that start-ups have two years of audited numbers to help “potential acquirers get a rapid and reliable financial picture of the business, a key step in accelerating their interest. This immediate positive step doesn’t require deep thought — just do it.”

CEOs and leadership teams often focus only an exit. They don’t strive to build the finest business they can, diminishing their chances of getting the best deal possible for themselves and their stakeholders.

 

Do you eager to know more about The Red Dot Theory, how to make your company IPO compliance or build your company’s financial road map?  Visit The Miracles of Capital for more details.

 

What is exit strategy ?

For those who are entrepreneur, bussiness man or having your own company, do you guys actually ever heard or know what is Exit Strategy ? If you guys don’t especially for the ‘rookie’ entrepreneur, you need to read this article.

DEFINITION

  • Exit strategy can be defined as the planned exit of the owner from their business.

For your business, you must need a plan on how you could get into the business, but did you know that you also need a plan to get out from it? If you thought on selling or maybe dispose a business, you will need a good strategy and careful implementation for this.  As for the facts, starting a business is way more complicated than you thought. As example, when there’s only one way to start company, at least there are 3 essential methods for the entrepreneurs if they want to leave their business that they founded which are selling, merging and closing.

When the entrepreneur have come up to the decision to sell their business that they work up so hard, you must know that was not an easy decision for them. But, it is a good choice if it under some circumstances. Selling may be preferable to owning if:

  • You are ready to retire and don’t have any heir to continue the company.
  • Partners with the business is decide to dissolve the partnership.
  • One of the owners dies or become disabled.
  • You or another owner got divorced and need cash for a settlement.
  • You want to do something more challenging, more fun and less stressful.
  • You don’t have enough working capital to keep continue.
  • The new company need new and fresh skills, new approach or resources that you can’t provide.

If you think that all the factors that indicate selling is a good choice, you should set the time for the sale so that you can get high prices. When sales are increasing and the profits are strong, you probably get the most for your company and also if you had unblemished history on your company’s performance, by all means you need to sell your company before any trouble strikes. Other factors that could affect the timing of a sale are:

  • Bank financing
  • Interest rate trends
  • Changes in tax law
  • General economic climate

To sell the business, usually the owners will have a contract with a professional broker to help them in this matter but you also can sell by your own. Plus, because of the awareness of relevant legal, tax and accounting considerations of using a broker is to help you protect your anonymity and confidentiality. A broker can become your ‘middle man’ by screening all the prospects and keep secretly the identity of the business owner from all except the qualified buyers.

Mostly, business buyer is someone like you who want to become a small business owners. But you also can transfer the ownership of a business to other business in a acquisition or merger. Business actually have more borrowing power than individuals and they willing to pay more than individuals. Businesses also tend to increase the chances your business will survive and to be more savvy than individuals. However, businesses can not move fast as individuals and it require you a year or maybe more to get your company ready to be merged or acquired. In that time, you will need to:

  • Clear up the balance sheet
  • Drop poorly performing products
  • Terminate insiders deals, such as property the company is renting from you or family members.
  • Trim any excessive fringe benefits.
  • Make sure you’re paid up on all taxes.
  • Have at least 2 year’s worth of audited financial statements.

Company that sees your business as a well fit with their own firm is the best candidate for a merger. If you have unique product or distribution channel, hey might as well willing to with a premium price. A poor merger prospect however, the only one who wants to put you out of business or only motivated by price and not interested in preserving the business.

The best, simple things that you can do are simply sell you inventory and fixtures, pay your creditors and employees, close the doors and walk away. If your business is failing, not valuable enough for anyone to acquire it or maybe the type of business that is not valuable without you personally operating it, the best choice is closing. If you do not have enough money although you has disposed your assets to pay for the workers, you just give what you have now and promise them that you will give the rest later. You can usually avoid legal wrangles if debts are in small amount.

Variations on this theme include making formal or informal arrangements to pay off your creditors, filing for voluntary liquidation, and declaring bankruptcy. Only bankruptcy is intended to give you a second chance while the others are almost certain to result in the end of your business.

 

Do you eager to know more about The Red Dot Theory, how to make your company IPO compliance or build your company’s financial road map?  Visit The Miracles of Capital for more details.