I was visiting with the 62 year old owner of a building supply company last week when the subject exit planning arose. It had always been his plan to turn the company over to his son, but the son has other plans. "He wants to coach his kids little league teams and be home by five o'clock. With what the economy has done to the business, if he's going to be here, I need him to think like and entrepreneur, not a nine-to-fiver. I told him if he can find a nine-to-five job, he should probably take it," Tom said.
This is more common than you might think. Business owners often have an exit strategy in mind, but the players they are counting on have other plans. Consider these scenarios we have seen:
- An 80 year old father is finally ready to let go and sell the business to his 55 year old son who he has paid well, but to whom he has never ceded an ounce of control. The son turns around and tells dad, "Thanks, but I'm ready to retire myself…."
- A 68 year old business owner plans to sell his company to his key employee on the installment plan when he turns 70, but the key employee doesn't want to take any of the financial risk, that comes with ownership.
- A 70 year old father in setting up his estate plan, has a daughter who runs the business and a son who is not involved in the business and not enough cash to equalize their inheritance. He decides to leave the business to the daughter and the building the business resides in to the son, so he can be her landlord…
I can go on telling stories like this, but the point is simple. The moral to the story is the same whether it is your goal to keep the company in your family, to sell it to your co-owner or management team, or to sell it to third parties in an M & A transaction. To avoid being blindsided by roadblocks an owner must plan plan plan. Planning must begin well in advance of your target exit date. This planning is best accomplished working with a team of trusted advisors, including a quarterback is experienced a systematic the exit planning process.
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