What Questions Do You Ask to Build an Exit Strategy? Five Topics

Interview with Norman Boone, CEO, Mosaic Financial Partners

Situation: Many entrepreneurs who started companies in financial services and other industries are now 55+. They may be ready to move on, but not necessarily ready to move out. What questions should they be asking as they plan their exit strategies?

Advice from Norman Boone:

  • The most critical question is what you want to do with the rest of your life. Most people don’t give this enough thought. It all starts with what is most important to you.
    • Start with a self-inventory assessment – what are your resources, options, and what do you want to do or accomplish?
    • Discuss with your significant other or partner what will work for both of you.
    • Answering these questions helps to lay out the alternatives. Now, thinking about your company, what is important to you? Is it legacy, the future of your employees and business partners, the future of your clients?  Does your business continue, or to you see a sunset?
  • If your business will continue, do you see an internal succession, or sale or merger of the company? If internal succession, here are the issues.
    • Who will be the new leadership? Do you have good candidates on staff, or do you need to hire someone who will take over?
    • Be careful not to expect your successor to be a mini-you. They need to be able to bring their own talents and perspectives to the leadership role, not try to duplicate you.
    • Do you need to beef up the training of current staff to increase their managerial capacities?
    • Is an employee buy-out an option? There is a variety of choices to investigate.
    • What will be your role during and after the transition? Will you accept that new leadership may take the company in new directions?
    • To be most effective, this needs to be a 5 or 10 year process. Ideally you will have two to four successor candidates to evaluate.
  • Do you sell to the highest bidder? Many of the questions here are like those above.
    • Will you sell to the highest bidder, or to the bidder who seems the best fit for your stakeholders and clients?
    • How much voice, if any, will you offer your employees and / or clients in the selection process?
    • What due diligence will you do on potential buyers?
  • Do you merge with a similar company?
    • If you can find a compatible merger partner the combination may be the best of two worlds.
    • What is the culture? If different, what will be the impact?
    • A merger of like companies may assume that the other party has a commitment to ongoing operation: but this is not guaranteed.
    • What will your role be, and what is the transition plan? How will you involve your key people in the transition?
  • The other option is to sunset the company. Here you must have enough in savings so that you can forgo future income from the business.
    • What about the other stakeholders and clients who’ve invested their careers and business in you?
    • Try to time your exit with the expiration of leases and other obligations to minimize exit cost.
    • How will you assist the transition of stakeholders and clients to new opportunities and providers?

You can contact Norm Boone at norm@mosaicfp.com

Key Words: Entrepreneur, Retire, Exit, Self-assessment, Options, Alternatives, Succession, Buy-out, Sale, Merger, Sunset, Staff, Stakeholder, Client, Plan, Control, Culture

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