Part 1: Business Owner Insights – The Importance of Implementing a Formal Exit Strategy

At Twelve Points, we often work with successful business owners looking to maximize their company’s value. The story of David, a manufacturing company owner, highlights the critical importance of proactive exit planning and value acceleration.

David had built his thriving business over 25 years, growing it to $20 million in annual revenue. He took pride in the company’s steady growth and loyal customer base. However, when a larger competitor approached him with an acquisition offer, David found himself woefully unprepared for the opportunity.

Despite his company’s success, David had never implemented a formal exit strategy. He lacked a clear understanding of his company’s true market value and had no documented processes that could operate without his daily involvement. His management team, while competent, wasn’t prepared to run the business post-acquisition. Furthermore, his financial records weren’t organized for due diligence, and he had no plan to minimize the tax implications of a potential sale.

As a result, the initial offer was disappointingly low. The due diligence process revealed several issues that further reduced the company’s value, ultimately leading to a missed opportunity for David to capitalize on his years of hard work. The trick to turn this missed opportunity into future success?

1. Start exit planning early, even if you’re not planning to sell soon
2. Implement value acceleration strategies to boost your company’s worth
3. Develop a strong management team to reduce key person risk
4. Regularly assess your business value and identify areas for improvement
5. Optimize your financial records and business processes for potential buyers
6. Consider the tax implications of different exit strategies and plan accordingly

Remember, a well-executed exit strategy isn’t just about selling your business—it’s about maximizing the value you’ve built over years of hard work. By adopting a proactive approach to exit planning, you’re not only preparing for a potential sale but also building a more valuable, efficient business in the present.

Please reach out to our team of experts today to discuss implementing your formal exit plan today!