For our final episode of season two, we’ve brought Greg Johnson, from Ascend Business Partners, into the studio to discuss the different ways you can exit your business and the importance of keeping key management personnel on board during the process. Greg brings a unique skill set to the show; he is a qualified accountant, a licensed business broker, and perhaps most interestingly, a certified exit planner.
What is a certified exit planner?
As Greg puts it, certified exit planners bring with them a specialist set of skills and knowledge that allows them to help business owners stop and look at their business as a valuable asset, to maximise the value that they can get from that asset and create an exit that is designed to meet both their personal, business and financial needs. Part of this skill set is bringing together the right professional advisors in a way that is actually logical, that is mindful of their time and which gets the best outcome for the owners knowing the owner has got really clear goals about what they are trying to achieve.
Locking in senior management as a pre-cursor to your exit
We’ve discussed in previous episodes the importance of retaining key management. This adds value to your business from a buyer’s perspective, as it ensures business can carry on as usual, without disruption. But how do you lock senior management in?
As Greg notes, there are a number of ways and it can often depend on what sort of exit strategy you have in mind – which is why it always pays to think about your strategy early on.
Offering your top employees equity in the business can be a good way to secure their long term service. It also has the added benefit of ensuring greater employee buy in to the success of the business. When employees own part of the business, even a very small part, it often affects the way they view the business and their position. However this approach raises issues of whether you gift employees equity or whether you require them to buy in to the business, even if it is just for a nominal amount. It is important that business owners put the time (and money) into ensuring that any equity arrangement is clearly documented from the outset to avoid problems further down the line.
The upside of locking in senior management in this way can be that it provides clarity in relation to the long term further of the business, both for the current owner and for any prospective purchasers.
How will you exit?
Another great thing about offering senior management equity in your business is that it can pave the way for a management buyout. By periodically offering up equity in the business you are able to effectively transition yourself out of the business.
However a management buyout is just one way which you could exit your business. As Greg notes, it is really important that the owner has thought about which way they actually want to head and what outcomes they are actually looking. Other options include staying on in a relatively passive capacity to provide an ongoing income. Alternatively, you may wish to exit completely via a trade sale, or perhaps you want to transition the business to the next generation in the family.
Whatever you do, TIME IS ESSENTIAL
The one thing which all of these options have in common, is time. Greg’s key piece of advice, and something that he sees all too often, is that business owners simply do not give themselves enough time to execute the strategy that is right for them. By planning early and planning well business owners can maximise their business value and appeal and ultimately ensure an optimal business exit.
If you are interested in finding out, you can contact Greg on 03 8794 7777 or by email at firstname.lastname@example.org.
*Please note that Martin and Ed’s business exit strategies are general in nature and do not take into consideration any of your personal circumstances. Further, Martin and Ed are not financial planners or accounting experts. You must seek individually tailored advice to ensure you properly prepare for your business exit.