by Todd Taskey on March 7, 2010
I read quite a few business books each year and have developed an ability to tell an academic writer from an entrepreneur in just a couple of pages, even without the help of the author biography. Built to Sell is the former and a book I feel comfortable recommending as an accurate and realistic guide from a successful entrepreneur who has “been there, done that”.
If you own a business and want to successfully sell your company one day, realize that exit planning is a multi-year process that is financially worth the effort you invest. If you are not a book reader, the cliff notes are contained in this article and you can keep current with John Warrillow’s blog.
Do you every think about selling your company? Have you done any exit planning? Here is a good first step…
by Todd Taskey on March 1, 2010
I was having breakfast with a CFO of a government contracting firm last week who shared a story that is instructive and insightful if you hope to successfully exit your business one day.
Two years ago, he was finalizing weeks of deal making on a small ($4.5 million) acquisition. About a week before the deal was to close, the recruiting manager left the company they wanted to purchase, making the acquiring owner just a bit nervous. After further consideration the acquiring owner decided to proceed, but knocked a half a million dollars from his offer. Although pricing is under constant negotiation during the closing process, was a bit unusual and it destroyed the deal. The sale never happened and the seller is still trying to recover from the personal disappointment and get his company back on track.
Important lesson: There are critical employees in your business who have the ability to impact your sale and the value of your company. Here are some guidelines to keep in mind while managing your company sale process:
1 – Keep the process confidential. In fact, you should not market your company for sale, but rather “considering strategic opportunities.” Use an outside party to help with your company sale. Remember, it is much less expensive to surprise your employees with news of a sale then having them surprise you.
2 – Design a retention package for key people that is consistent with your earn-out provisions. You are likely to have some of your sale proceeds paid out months after the closing based on performance metrics. These should be coordinated with a retention package with key employees that allows them to share in the upside by increasing the back-end payout to you.
3 – If certain employees are key to maximizing the value of your company at sale time. they are key even if you do not sell the company. Make sure you have golden handcuffs to keep them motivated to continue to build value in your company. A well designed plan should always benefit ownership.
There are many moving parts to manage during a business sale, and retaining key employees is one of those parts. Since employees a emotional human beings, they can be one of the most challenging and surprising parts. Remember, surprises are seldom good news when selling your company.
These issues should be addressed well in advance of a company sale, in fact, they are all part of a well designed exit planning process. This is a growing field of business advisors and a good exit plan would have saved this particular owners retirement life.
