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Exit Planning: Two Business Owners Wanted to Exit. Only One Took Planning Seriously. Guess What Happened?

Yesterday, we looked at three ways your exit planning can position you for growth. Today, I'm going to tell you a tale of two business owners and their wildly different outcomes in their exit plan. Of course we will use made up names, but the basic facts of each story are true.


First, meet Fred. Fred is a second-generation farmer who knows from personal experience (as well as observing nearly every other farm in his region) that a man shall not farm forever. He wants to get ready to transition his farm. He and his wife would like to spend more time with grandkids, and he feels like he is getting too old for this. 


Sam, a seasoned software guy, also knows that, while his company is much less physically demanding than farming, he and his wife want to pass this business on to the next owners. They want to have the freedom to serve at a summer camp for teens, see their grandkids more, and allow their employees to take on new responsibilities. 


Both Fred and Sam have around 80% of their net worth tied up in their businesses. Both would like to move into their next act. Both have younger successor candidates behind them. Both have talked with us about exit planning. It's the year 2019.


Want an update on Fred and Sam? Skip ahead to today. 


At the time of this writing, Fred is still farming, and he and his wife still want to exit. Sure, they are getting some grandkid time, but the younger successor candidate got tired of waiting and has moved on. Now they can try to sell outside, or bring on, another employee and try to start the transition process over again. Or they can keep doing what they've been doing. 


Meanwhile, Sam is out, and with him has come the newly unlocked 80% of his wealth by a strategically planned exit.


What's the difference? Action.


Specifically, Fred hoped, while Sam moved. Sam did several things right. He took his personal readiness seriously: 

  • He and his wife took the time to develop a well thought out personal plan about their next act.

  • He developed a detailed financial plan, knowing how much he was going to need to get from the business in order to fund the life that they dreamed of.

  • He took the time to understand the tax implications of different deal structures.

  • He examined all of his exit options, and this allowed him to pivot to a different option than he’d anticipated.

  • He developed a highly capable team around him to advise different aspects of the exit.

  • He communicated well along the way with his family, his employees, and his team of advisors.

He took his business readiness seriously:

  • He built on years of experience to prototype their business systems and structures.

  • He took the time to learn, which of his customer segments were the most profitable, and developed those segments.

  • He engaged with his key employees, and made sure they were an informed participant in the process  

He took his business attractiveness seriously:

  •  He packaged the business’s intellectual property in a cohesive and attractive way.

  •  He maintained excellent facilities, perfectly set up for this business.

  • He developed his customer base, taking care not to let his revenue become too concentrated, And thereby avoiding unnecessary risk for a potential buyer.

Now, Sam and his wife are doing exactly what they had wanted to do. They have exited successfully. 


We haven't lost hope for Fred. And if you are a business owner who has stalled out on exit planning, there is hope for you too. It simply begins with action. 

Any opinions are those of The Weddle Team and not necessarily those of Raymond James Financial Services, Inc., or of Raymond James. The information contained in this presentation does not purport to be a complete description of the securities, markets, or developments referred to in this material. There is no assurance any of the trends mentioned will continue or forecasts will occur. The information has been obtained from sources considered to be reliable, but Raymond James does not guarantee that the foregoing material is accurate or complete. Any information is not a complete summary or statement of all available data necessary for making an investment decision and does not constitute a recommendation. Investing involves risk and you may incur a profit or loss regardless of strategy selected.


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