Do You Need an Exit Strategy or an Option Strategy?

“Exit strategy” is a popular term these days. It describes the process a business owner uses to determine how to transition out of his or her business. Owners have many transfer options, including a sale to employees, a family transfer, an ESOP, and a sale to a third party, to name a few. It can be a struggle to determine the right transfer channel. Many owners spend a lot of time preparing for the transfer, which often leads to a great deal of dissatisfaction with the process.

We feel the best transfer strategy is to preserve as many options as possible. We call this an “option strategy.” It allows you to focus your time and efforts on creating the most value in your company so that all options are available when the time is right for a transfer. This will put you in a position to choose the path that is best for your business. Using the option strategy may also result in a higher price if selling to a third party or a stronger business if transferring to your family.

In order to create the maximum value in your business, it needs to be organized so it can run without you. This will require you to change your point of view from someone who works in the business on a day-to-day basis to that of an investor. When helping companies maximize their value, we focus on two principal areas: people and governance. In order for you to be able to really step back and replace yourself, your business will need to upgrade its executive team and its governance structure. Both of these areas need to operate at a very high level in order for your business to stay strong and continue to grow once you are no longer there every day.

Mario O. Vicari is a director with Kreischer Miller and a specialist for the Center for Private Company Excellence. Contact him at Email.   

Have you begun the transition planning process? Share in the comments.