An owner’s business plan is the foundation for what he or she wants to achieve—a blueprint or guide for creating a successful promo business—but that success does not come easy. It takes a lot of hard work and the ability to overcome many challenges, not least of which are changing consumer trends, growing competition, developing marketing and advertising strategies, proper budgeting, spending wisely, prudent purchasing and a healthy bottom line.
What happens when those goals are met, your business has grown and matured, and you’ve decided to transition out of it? You’ve built your business from the ground up and you have a proven track record of success, which can translate to big resale value—if that’s the way you want to go. Now is the time for you to plan for the future.
Exit strategies to consider
Business owners should always take the long view from the get-go. You have to plan ahead and begin with a realistic end in mind. The possibility of keeping ownership of your promo business and never letting go is always there, but your goals in life and business may change over time, so it’s necessary to have a long-term game plan.
When you do decide that you want to make an exit, you should establish deadlines and adhere to them as best as you can. Then you should start assessing your options, which will depend on the kind of business you are running. There may be opportunities to reduce your stake in the business, or you can sell it to make a substantial profit. At Fully Promoted, we’ve seen multiple examples of resale success stories. Greg Stargell, current owner of the Fully Promoted franchise in Decatur, Ala., purchased his store from a couple who wanted to retire, and so the sale was a boon to both parties.
However, if the most beneficial option to you is to sell, we then highly recommended hiring a business broker from a reputable organization. A buyer will be looking to get the best deal possible, while you, as the seller, will want to get top-dollar for the sale. All the hard work and perseverance you’ve put into your business creates what we call “sweat equity” and an emotional link that buyers may not immediately see. They just want a good deal, and this disconnect can create tension and unforeseen issues at the bargaining table. That’s why you need an experienced business broker.
The legacy approach, as previously mentioned, is when an entrepreneur wants to keep the business in the family, long-term, and transitions it to an immediate family member or a relative. The benefit to this option is that it keeps the family name prominent. However, the downside is that you have to be practical about choosing the best person to run the business. Make sure they have the right temperament and can handle the volatility and stress of business ownership.
A merger or acquisition gives you the flexibility to negotiate the selling price. An IPO (initial public offering), however, values your company relative to the industry. An IPO is right for a small number of startups, as well as larger corporations, but it may not be ideal for most small businesses, as you’d have to convince both investors and analysts on Wall Street that stock in your business is worth something to the general public. Do you want to tailor your business decision based on market trends and analyst reactions?
Another exit strategy is more of a niche-type model. It’s called “acquihire.” This transaction can be classified as a buyout—but it is a buyout based on acquiring a company’s skilled, talented employees. Business owners who want to ensure that their most talented employees are taken care of may opt for this model, but if that’s you, be sure to sure to negotiate wisely and keep the employees as the focus. Don’t forget they came to work for you, not another company. Keep their best interests in mind.
An exit strategy is not an indication of failure—it is an indication of planning for the future. As a promo business owner, you should always think about your next move. Just as your business plan was the foundation to guide your business in its early stages, exit strategies are plans that help guide you to a positive conclusion. In fact, many businesses begin the process with the express purpose of exiting after a pre-determined number of years. In the final analysis, exit strategies are plans for your future security.
Reasons to plan ahead
A planned exit strategy is needed for a variety of reasons, such as pending retirement, health issues, changes of interest, an unexpected offer for a more lucrative venture or a need to spend more time with your family. Knowing the right time to leave will best serve your needs and help the longevity of your business. Business owners who no longer have the “fire” to invest needed time and effort are doing themselves—and their employees—a disservice.
Knowing when to leave is important. Position yourself now for a potential exit later because a life-changing event or situation can happen at any time. Spending time on an exit strategy now can save you from a hard landing in the future. Keep in mind that you’re not planning for the worst—you’re planning for the best. No matter where you are in the lifecycle of your business, ask yourself if retirement is set up as a future possibility. Is there a specific number of years you want to invest in your business before you step away? Do you want to be involved in the business in some capacity even though you’re not the owner? What is the proper exit strategy for you to use?
You should revisit these important questions annually as life and plans change. Your exit strategy begins with understanding your personal and business goals, assessing financial readiness, and understanding the real value of your company and the options available.
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