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.