Would You Hire Monty Hall?

Imagine standing next to Monty Hall, surrounded by enthusiastic contestants screaming advice regarding which door to pick.  And you’re listening, because you are the lucky contestant on “Let’s Make an Exit Deal”!   Door 1 looks as promising as Door 2.  But maybe Door 3 conceals the coveted grand prize.  Behind each door is a potential successor or acquirer, anxiously awaiting for you to hand them the reins in exchange for a deal.

That’s right, you are playing the high stakes game which will determine your future. Should you choose your heirs or management team, a private equity investor or a strategic buyer. And imagine making that decision in a split second, among frenzied bystanders, with Monty Hall as your advisor. Monty is a great guy, but his job is to keep the show exciting and on track.  Monty trades on inciting drama, and the rush of adrenaline which comes with the dream of a great deal.

This Isn’t a Game

Choosing an exit option is complex and complicated. Owners need more than a split second and suggestions from well-meaning friends and acquaintances.  Owners need experts, because:

•  This is a once in a lifetime event for most owners.
•   The stakes are high and there are countless risks to navigate.
•    So many people are impacted: spouses, family, employees, customers, communities, etc.

Little wonder owners like you feel overwhelmed, conflicted, and frankly scared of making a mistake.  The options all look enticing, yet full of unknowns. How stressful!

If You Only Knew What Was Behind the Door

Imagine if you had all the information, the numbers and the personal impact, of each option.  And you could predict how each option would align to your business, investment and lifestyle objectives, and be certain no unintended consequences surprised you.  Now making a choice is relaxing and rewarding because you are confident and in control! How could this be your reality? 

How Do You Choose the Right Door? 

Planning for transition is not a DIY project.  But a Monty Hall clone is not the advisor of choice either.   As you approach change, your business and personal objectives, facts and interests become entangled and thorny.  You need an independent advisor whose only agenda is to:

1.    Help you define your business, investment and lifestyle objectives so you can determine what you want, in every regard.

2.     Analyze, evaluate and advise you on your options in the context of your financial situation, business value, and market realities.

3.     Guide you in implementing your selected option in a way that you control the process, minimize risks, and maximize the outcome.

Critical attributes of such an advisor:  objectivity and resources.  You need someone who is agnostic to which option you choose, but has the resources to evaluate and analyze all the tax, finance, legal, and company and personal implications of your choice.  No one person can be so well versed. So that someone is really a team of professionals with a lead advisor whose principle success metric is achieving yours.   Remember, this is a complex and complicated situation.  A comprehensive planning approach well before selecting an option yields the best analysis, bringing you clarity and conviction.

What awaits behind the Chosen Door?

Peace of mind, financial security, freedom to move on with your relationships intact. You feel no regret because you and your advisors evaluated the merits of all the options, and skillfully navigated the pitfalls well in advance. Your advisor planned for results, which yielded you optimum economics and terms. And best of all, you are confident in your decision, knowing you picked the door with the ‘grand prize’ that is best for you, your family and your future.  

How Sales Growth Could Sabotage Your Successful Exit

Getting an order feels great.  Getting dozens or hundreds feels even better.  This is especially true if you are a business owner who came up through the sales ranks.  There is nothing more gratifying than watching the dogs gobble up the dog food. 

So how could selling more become too much of a good thing? And how could sales growth sabotage your exit plans?

As your business grows, the top line is the headline.  It is the most obvious measure of progress.  Tracking sales growth is both easy, and very satisfying. In fact, it can be addictive, especially if the product or service is a one of your own creation.

And it drives the behavior of every employee, including you.  As the hunt for revenue accelerates, you may devout hours to customer or marketing activities.  And to fulfill all those customer orders, you may dive deep into operations.  And to determine how all this activity will hit the bank account, you may sit alongside your financial officer calculating and projecting future cash needs. 

These are all legitimate activities, and in fact are the signs of a dedicated, hardworking owner.  Your guidance in these areas makes the enterprise run more smoothly, but it also means you are in a hands-on role.    As a conscientious operator, you probably:

• Concentrate on: Sales and customers
• Measure success by: Revenue
• Worry about: Losing a sale

But are you just an operator?  Of course not.  You are the owner, the primary, if not sole shareholder, of the business.  

Time to Make a Shift

As you approach exit, you need to make a shift, because focusing just on sales and operations could keep you from seeing what is really important at exit:  value.

The shift every owner needs to make is to view their business as an investor.  As a shareholder, you should:

• Concentrate on:  Equity growth
• Measure success by: Return on investment and profitability
• Worry about: Risk and unpredictability     

See the difference?  The operator list is sales-centric.  The shareholder list is value-centric. 

Why Make the Shift?

Buyers are value-centric. If you are within 5 years of exit, you need to begin thinking like a buyer, which means looking at your company as an investment, not just a business which generates revenue.

If you don’t make this shift, you risk building just a revenue stream, and not a enterprise investors want to own:  an operation which produces profits, with minimal risk, year after year. 

How to Make the Shift Today

Draft a shareholder dashboard with key metrics you will monitor in 2015 to gauge the progress of increasing value in your investment.  Trouble deciding?  Start with the bottom line:  profits.  Every public company measures earnings per share (EPS) as an indication of value appreciation.  As a shareholder, this type of metric should be on your investment yardstick too.

An investor mindset versus just an operator mindset, will help you manage, lead and make decisions differently.  And as a shareholder, you will benefit greatly from the results. 

Finish 2014 with a Big Win!

A winning season usually ends with a trophy, high fives and a smile for the cameras.  But also a sense of accomplishment and excitement.  Do you want to finish this year with an adrenalin rush of achievement? Then this 20 minute final act of 2014 is for you.

Cashing in at the hand off for most business owners is the definitive win.  Approaching exit or transition with the confident the business is truly worth what the owners needs to retire, provide security for family, and leave a legacy, is the ultimate trophy.  But how can you

assure you will win that trophy?  How can you be confident you are doing all the right things, making the right decisions, allocating the right resources?  Actually, it’s easier than you might think. And you can do it today!

The Bull’s Eye Action Plan

There are countless ways to build value in a business. But do you really have the time, energy and resources to implement multiple initiatives?  I doubt it.  So what is the alternative? Focus on the bull’s eye.  Identify the one highest impact, lowest hurdle area of your business to build value and focus just on that in 2015.  Believe me, it is enough for one year.  And if you select the right objective, the rewards this time next year will be obvious, and measurable. 

Step 1: Take Aim at Your Target

Begin by focusing on your target, which is the value you have in the business currently. Don’t know how to evaluate this?  Matrix Value Advisors has developed a quick Value Drivers Self-Assessment for 11 key value imperatives.  You can rate your company on each attribute. But more importantly you can rate the attribute from your eventual acquirer’s point of view. How important is this attribute to them?  This is critical as your acquirer is the ultimate value decider. 

Step 2:  Find the Bull’s Eye

Score the assessment, then look for the widest gaps.  Did you score your Market Position relative to competitors a 3, but your potential acquirer would expect a 9?  Did you evaluate your Management Team a 2 because you still run all aspects of business, but a buyer would expect the team to manage the company without you, thus rating this attribute a 10?  Identifying your gaps will lead you to your bull’s eye: the one place to focus your value building activities in 2015.

Step 3:  Launch Your Arrow

Taking action is where most plans fall apart.  That’s because getting started seems overwhelming.  So I suggest selecting just one of the following quick start mini-steps:

A.     Learn more about Value Drivers by requesting an in-depth whitepaper at   tgillespie@matrixvalueadvisors.com .

B.     Read about high return value strategies in A Surefire Tactic to Improve Your      Value.

C.     Talk to an advisor to discover how you can achieve your value goals by calling    us at 704-451-6178.

Now commit to a completion date within the next 30 days, and YOU ARE FINISHED for 2014!  That’s right, done!  You can confidently end your year because you will be starting 2015 with a goal and an action step to achieve it. With a plan comes power, purpose and the excitement of accomplishment. What a way to score a final big win for 2014! 

How Much is Enough?

This year I have shared several approaches to building value so you can exit your business the way you want.  But what I haven’t addressed is what does ‘the way you want’ look like. Do your dreams of exit include:

• A cruise around the world when you retire?
• A well stocked bank account?
• Being free of debt and obligations?
• Freedom to spend your days with only your agenda in mind?
• A substantial estate to pass along to your heirs?

Or is there more? 

Recently I attended a thought provoking event hosted by ACG Charlotte and sponsored by the Foundation for the Carolinas, “Philanthropy and Exit Strategies”.  This panel discussion featured one local business owner’s commitment to philanthropic goals as a primary outcome of his exit strategy.

Jay Faison is a serial entrepreneur having founded and sold two businesses prior to starting SnapAV.  In advance of his exit from this last venture, Jay sought advice from his trusted circle of professionals regarding donating a majority of his business to a non-profit.  Interestingly, he found this more difficult than he had imagined.  His attorney said his plan was “inadvisable”.  His wealth advisors saw it similarly.  I presume both considered the owner’s goals overly altruistic, and asked themselves ‘why would he give away so much of his wealth?’

Maybe the reason was quite simple:  Because it was valuable to him. 

I believe that every business owner builds value in multiple dimensions as they grow and expand their enterprise.  Most of this value can be categorized in three distinct areas: 

Business Value:  This is the value of the cash flow engine or operating entity, with the business owner as chief executive and operator.

Investment Value:  This is the equity account, where the owner’s capital appreciates, with the owner as shareholder.

Lifestyle Value:  The perks of being the boss, setting your own hours and priorities, with the business owner as beneficiary.

Or is it benefactor?  Owners have the latitude to build value to reap the rewards or build value to share it with others. The freedom of choice is perhaps what is most precious.

Value has as many dimensions as humans have ideas and passions.  For Jay Faison, what he valued was the opportunity to positively impact global climate change. So he created Clear Path Foundation (http://www.clearpath.org to go live in early 2015).  Most scientists agree a warming environment results in polar icecap melt, endangering the habitat of already threatened species and raising ocean temperatures which spawn destructive hurricanes and storms. 

Climate change is a controversial topic. But as Jay sees it, if he’s wrong, his efforts will still improve the global ecosystems.  And if he is right, he and his colleagues will help save humanity!  Now that is valuable! 

For this owner, lifestyle value manifested as quality of life value- for everyone.  What’s more important, it gives purpose, and power to Jay’s exit.  He is setting up his own foundation as a donor advised fund which allows him to guide his philanthropic activities. 

The result:  An owner's exit has tremendous purpose

So many owners are afraid to exit because they don’t have a plan for post ownership.  But the plan may be as simple as considering how you could convert some of your exit wealth into purpose value. 

What do you want your money to mean? Start now by thinking of how you can build purpose value and make a difference. Creating a charitable foundation is a strategy for re-directing your influence and impact as a business owner.  

“Life is full of possibilities, so full that it's insanely ridiculous. Yet those possibilities are meaningless unless you do something with them.” as Ralph Marston wrote recently in his Daily Motivator. 

Empower the value you've created to transform your passions into real impact, and thrive well beyond your exit.

To learn more about creating your own philanthropic legacy, visit Giving Matters Inc.

Don’t Trick Yourself into Staying Stuck When It Is Time to Make a Shift

Who doesn’t have fond memories of trick or treating?  Wandering a shadowy neighborhood, climbing mysterious porch steps, giggling with delight when the scary old lady around the corner hands out a full size Hershey bar.  What fun. 

But when are you too old to trick or treat?  Why would you stop?  Perhaps it was when you:

• Could balance the plastic candy collecting pumpkin in the palm of one hand
• Looked plain silly wandering up to a neighbor’s house surrounded by munchkins half your height
• Found the Budweiser the chaperoning dads sported was more appealing than the candy in your silly plastic pumpkin

But the biggest challenge:  how would you celebrate Halloween differently.

That’s takes some thought, planning and a seismic shift.  Several years ago, my 7^th grade son and his garage band buddies decided it was time to abandon the plastic pumpkins. Instead they hosted their first driveway concert on Halloween Eve. 

This shift toward aligning their activity (a gig) with their goals (an applauding audience) paid off big:  not only did they attract a crowd of goo- goo eyed middle school girls, this event launched the professional music careers of several band members.  Although the band is not rich and famous yet, they are now collecting CD, performance and merchandise income instead of candy this Halloween.

What shift do you need to make this Halloween? 

May I suggest a shift from being sales-centric to value-centric?

Recently a client shared with me the significance this shift had on his business.  As a driven and talented founder, Ray was myopically focused on sales growth.  He was forever dreaming up new products, new markets, new anything to build his top line.  His business grew, and he felt great. The he discussed his valuation with an investment banker who pointed out the shortcomings of his enterprise, and his less than acceptable market value. 

Like a middle school trick or treater, he knew he needed to make a shift.  We had a chat, and I suggested he direct his efforts toward building value.  Rather than spend all his time and energy generating another sale, he needed to pay attention to what the market values:  what lies inside and behind the revenue line. 

Fast forward to this Halloween.  Ray implemented the shift over the past few years and now has a company with 12% more revenue but worth over 20% more.  How did that happen?   Ray’s shift involved reengineering numerous facets of his business. 

But he started simply- at the top. 

Revenue growth, as the primary yardstick for performance is fine as a business matures.  Increasing sales often means more customers, more opportunities, more employees, more market visibility, etc. All of this confirms an owner’s belief in their business, especially if increasing profits are the result. 

But as an owner begins to consider a transition out of a business, the revenue yardstick must be replaced by the value yardstick. 

That’s because the market measures success on several fronts, not just on the top line.  In fact, the revenue line itself has numerous value dimensions:

• # of customers and sales per customer
• # of industries served, and profile of those industries
• # of product offerings and sales per product
• Repeatability of sales, annuity or licensing streams

These details can tell a wide ranging story about a business.  And represent a range of risks.  Consider two companies, of comparable size in the same industry:

Company A:  Increasing revenue is due to an increasing number of customers but sales per customer is flat.

Company B:  Increasing revenue is due to sales per customer increasing significantly yet the number of customers is declining.

Both companies show growth, but Company A is demonstrating market penetration while Company B‘s customer base is becoming more concentrated.  The factors associated with this trend will impact how the market views each company’s risk, and therefore value.  And the market could be a third party acquirer, or for an insider transfer (i.e. manager or family member buyout) the market could be the bank who will finance a portion of the transition.

Acquirers and financing sources love revenue growth but hate risk, perhaps even more.  Not considering this reality is a significant factor in unmet seller expectations.

The lessons for Ray, and any owner who dreams of maximizing their life’s work at the point of transition: 

• Revenue is only one dimension of company performance
• As an owner draws closer to transition, value becomes the metric to monitor
• It is critical to shift focus to how to grow business value, not just how to grow

If you believe you need to begin making the shift, I am happy to provide two resources for you:

1. Take the Matrix Value Advisors' Value Drivers Self-Assessment
2. Email me to request a copy of our Value Drivers Whitepaper

Every business owner deserves to reap the rewards as Ray will.  But to do so, every owner must do what Ray did:  make the shift to being value-centric, not just sales-centric.

It is a trick to do it, but in the long run changing your approach will lead to some major treats!

A Three Point Action Plan for Exit Success

Where will your business be in two years?

Hopefully not in the midst of a ‘Perfect Storm’.

The ‘Perfect Storm’ conjures up a powerful image of being overwhelmed and completely at the mercy of raging forces beyond one’s control.  Feelings of desperation, fear and anxiety abound, just hours after sunny skies and smooth waters prevailed.  How could things turn so quickly?  Could preparation have made a difference?  Did the forecast predict this calamity?

As I listened to an economic update last week, the ‘Perfect Storm’ scenario swirled in my head.  Was I seeing into the future?  Is the storm approaching or on the distant horizon? And what is there to do about it?

According to the speaker, William Stone, PNC Chief Investment Strategist, the US economy is in the 62^nd month of an economic expansion.  The longest US expansion on record is 120 months which spanned 1991 to 2001. Many have been exceptionally shorter.  So the natural question is where we are now.  Mr. Stone gets this question frequently.  His view is the expansion is “middle aged” with good fundamentals for continued viability.  However, Mr. Stone was quick to point out that this expansion could shift prematurely, based on unforeseen events.  But the chance of it extending beyond the current 120 month record is highly unlikely.  

So how long will sunny skies and calm seas prevail?  Perhaps as long as 58 months but most likely we’ve got about 24-36 months to reap the benefits of growth, stability and expanding opportunity. Looking at the calendar that means we have until September 2016 before storm clouds begin to collect on the horizon.

Complicating the forecast is the dynamics of the mass of baby boomer business owners who seek to exit their business. This retirement trend was documented by the IBBA (International Business Brokers Association), The M&A Source, and Pepperdine Private Capital Markets Project, along with other surveys, which note:

•  40% of family owned businesses expect to change leadership within 5 years
•  7,000 businesses were sold in 2013, a 50% increase over the prior year
•   65-75% of small businesses will sell within the next 10 years
•  The top reason for owners considering a sale is retirement, followed by burn-out

Do you see a Perfect Storm brewing?

I do. 

As an exit strategy advisor, I help business owners chart a path to exit to maximize their life’s work.  But that means planning, which takes time.  Time is always the number one enemy of business owners’ intentions.  But usually they focus on time to meet all the day to day demands of the business, time to get ready for a new client proposal, time to prepare for year-end activities and other urgent operational considerations.

But now time has grown into TIME. 

TIME is the runway left to get the business, the key employees, and owners themselves ready to exit before this expansion ends. Generally 2-5 years is not very long, especially if you haven’t even set a strategy yet.

As the number of baby boomers who want to retire increases, owners will face an increasingly stiff headwind:  an overly crowded market of sellers.  And as the expansion nears the end of its cycle, eager competition will churn the markets, putting pressure on valuations, and things will get choppy. Worn-out, unprepared, anxious sellers could quickly find themselves in a race to the bottom.  And you could be dragged down there too.

How do you avoid the Perfect Storm ending to your life’s work? 

Start by focusing your attention, energy and resources on a 3 Point Action Plan

Step 1:  Know what is valuable about your business today:

• Ask an advisor for a current indication of value
• Take an inventory of company value drivers- positives and negatives
• Quantify these exit risks as buyers would

Step 2: Know what you need to exit:

• Determine your post transition goals and lifestyle cost
• Meet with your financial advisor to project retirement income resources and needs
• Clarify your transition timeframe- best case to most probable

Step 3: Build value quickly:

• Identify 3 high impact value building strategies
• Evaluate the resources (time, money and energy) needed to implement
• Prioritize the top 3, develop an action plan with metrics and get your team on board to execute

The object is two-fold:

• Be well prepared to exit before the before the expansion peters out
• Be the most attractive (high value, low risk) company in your industry or geography

The result is multi-fold:

•   Flexibility to exit when the market is most favorable
•    A strong valuation defendable even in a challenging economy
•   Improved position to negotiate favorable terms
•     Get more  of what you want

Just like the’ Perfect Storm’, it’s all about preparation and making the right decisions now, long before the storm clouds gather.  If you commit to this 3 Point Action Plan, you will be sailing into the sunset while watching the other ships struggling in turbulent seas. 

Safeguard Your Transition by Avoiding Dangerous "Surprises" with Key Talent

Birthday parties aside, surprises are rarely welcome, and often lead to costly recovery plans.  That’s why cruise lines sell trip insurance by the boat load!  When it comes to orchestrating the perfect vacation, your personal time and money is just too precious to put up to chance. 

Unfortunately many business owners do not take the same care when protecting their own businesses. They have the standard insurances, contingency plans and protocols in place, but are not well prepared for the disruptive surprises that key managers and staff often bring forward during the transition process. Fortunately many nasty surprises related to key talent are in fact predictable and avoidable if you are well prepared.

Jay, the owner of a cleaning supply distribution company was unfortunately not prepared.

He had high hopes for a successful exit from his business.  And he had good reason to be confident. He had a thriving enterprise, in part because he had a small but high performing management team, for which he was proud and thankful.  He provided ongoing team development, individual skills training and made certain he shared his know how with each manager. 

Jay was rewarded with growth and profitability well beyond his competitors. And the personal gratification of building a loyal, and high functioning team was beyond his expectations.

Then disaster struck!

One Thursday afternoon, two of his lead managers tendered their resignations.  Jay was dumbstruck.  Why?  How could this have happened?  Didn’t he do all the right things?  Jay was rattled, then hurt, then angry.  How could these two do this to me, after all I have done for them? 

But then he realized:  this was a predictable surprise.  Jay knew he had not done everything to reduce the risk of losing key talent.  Although Jay had rewarded his managers with annual bonuses, he didn’t think longer term.  But his managers did.  And without economic reasons to stay, they didn’t. 

And now the consequences were piling up in Jay’s head: 

•    How long will it take to replace them?
•    How much will it cost?
•    How will the company keep up its performance while he looks for replacements?
•    How will he reassign responsibilities in the short term?
•    How will he manage all of this, and how about the rest of his employees?

But the number one issue:  surely this will derail his plans to exit the business as he had intended.  And worst of all- he didn’t have a recovery plan.

How could Jay have avoided this predictable surprise, turned disaster?  He could have asked himself better questions and created a plan for more deeply engaging his key staff long before his transition.

Your Action Plan For Avoiding Disruptive Surprises During Your Exit:

Start with your transition objectives.  This is especially true if you are contemplating an exit in the next 3-5 years.  First, ask yourself:

•  When do you wish to exit?
•   What will the company need to be worth when you exit?
•   How will you exit- through an external sale or internal transfer?

Once you know where the company needs to be to achieve your outcomes, you and your exit advisor can determine what you need your key employees to accomplish so you attain your goals. 

Then, with these objectives in mind, create a Long Term Incentive Plan for key managers.

The idea is to go beyond rewarding top talent for what they are currently contributing, and begin to create a system for keeping essential managers engaged and contributing well into the future.  This will help you avoid nasty surprises when it comes to your top talent.

Cash bonuses are great short term rewards for employees, but never take the place of ‘golden handcuffs’ for critical managers, especially as you contemplate your transition.  These managers are pivotal to the company’s success and must be compelled to stay.  They must be motivated to lead exceptional performance before, during and after your transition.

Long Term Incentive Plans can take many forms, be equity or cash based, reward performance across several metrics and have both company and employee tax implications. 

Once you know where the company needs to be to achieve your outcomes, you and your exit advisor can determine what you need your key employees to accomplish so you attain your goals. 

There are far too many specific features to consider here, but your plan should have these foundational elements:

1. Your plan must be specific, in writing and easily communicated. Your key employees need to fully understand the answers to their most important concerns: what is expected and what’s in it for them.
2. Your plan objectives must be directly tied to your exit objectives.  Too often owners focus just on top line growth when transition value is more often influenced by profitability. 
3. Your plan needs to offer tangible benefits for your people. Key managers are highly motivated to meet the performance targets when the rewards are significant and financially meaningful to them.
4. Your plan should be rolled out in stages and given enough time to mature. Vesting over time  ensures commitment to long term goals and retention.

Life, like business is unpredictable. But often surprises, especially costly ones can be avoided. 

Talk to your exit advisor today if you don’t have a LTIP as a key element of your plan to exit your business when you want, with the financial and personal rewards you desire.

For further information, read the first blog in this series:  A Surefire Tactic to Improve Your Valuation at Exit

Don't Leave Your People Out In the Cold: Start Transferring Institutional Equity Today

Commitment and competence are not enough. Sometimes even the most dedicated team can risk being left out in the cold for lack of a crucial tidbit of knowledge.

I was reminded of this recently when  enjoying  Monarch of the Glen, a BBC production about a titled Scottish family desperately trying to hold the castle estate together with little more than good intentions and duct tape.

In a recent episode Lexi, the very efficient but temperamental cook, walks off the job. At the same moment the century old furnace conks out.  The hapless family assembles around the furnace armed with wrenches and hammers, confounded as to a fix.  Thankfully Lexi hears of the troubles and despite her temper, comes to save the day.  She saunters up to the furnace, lifts a rusty control panel cover and pushes the big red button. Wa-La - the furnace ignites, disaster is averted!

Many business owners fail to avert their own disasters by transferring their own ‘Institutional Equity’ to their successors, or management team members. Institutional Equity is value you bring the organization that reaches far beyond your ordinary duties because of the things you know about the institution.

Just because you know about the red button in your organization does not mean that your management team does.

More importantly, to our conversations about transfer of ownership, Institutional Equity is information that may seem to be of secondary importance until it is required to solve a problem. Lexi’s knowledge of the red furnace button, perhaps mundane on most occasions, was critical on another. But until that evening, knowing about the red button didn’t seem to Lexi worth passing along. 

The same thing can happen to you.

Over the course of your career in your business, as perhaps the founder and certainly as the owner, you have amassed a wealth of ‘secrets and tips.’ It is those often proprietary or intangible bits of knowledge, proven approaches or unique enablers that make the business operate more efficiently and effectively.  

In order to smooth transition, and build ongoing value in your company, you must find a way to systematically impart your unique approach and knowledge to your key managers.

In your business, do you know what these tidbits are?  Have you shared them in an orderly and systematic fashion?  If not here are 5 Questions to become an Institutional Equity Champion like Lexi:

Why is it important?  The obvious answer is to reduce the risk of transition.  Remember- acquirers, both external and internal, want to eliminate risks in operating the business and your insider’s information is the key to a more favorable valuation, and terms.

When should you start?  It takes time to share a life time’s worth of wisdom so start today.  The best way to convey vital information is in real time.  As situations arise it is the perfect opportunity to share your perspectives and problem solving approach with key managers. This real time learning lab will demonstrate your confidence in your managers, and they may even surprise you with their enthusiasm to learn and excel.

How should you start? 

 Step 1: Become aware of the information and analysis you use to make decisions. 
 Step 2:  Become intentional about sharing these tidbits. 

 Step 3:  Write down these points. 
 Step 4:  Share them at your management team meetings or one on one sessions.                                 Make them a regular feature of your leadership approach. 

Who should you share this information with? Obviously share this information with your key managers, especially those on your leadership team.  But you may also consider those beyond your inner circle who could benefit from your wisdom.

What is worth sharing?  All information that is exclusive to you is important.  But that may be a long list. So I suggest starting with these three: 

·    The People: key relationships with external partners (customers, vendors, advisors such as accountants, bankers, attorneys, etc.)

·    The Facts:  financial information, company documents and commitments, performance targets and acceptable variances, etc.

·    The Processes:  your problem solving and management approach to specific operational, talent, finance or sales problems.

If you master these 3 areas you will be building value in your company each and every day.  You will see the pay off now in the form of improved performance, and when it is time to transition. 

Your institutional equity is one of the most significant assets you have, but it only becomes valuable if you transfer well ahead of handing the keys to the next owner.

Please post your thoughts and questions below. I enjoy hearing from business owners who are building value and preparing for transfer.

Other blogs in this series:

1) A Surefire Tactic to Improve Your Valuation at Exit: Mind the Gap

2) Cash In at the Hand Off