17-Point Business Exit Strategy Checklist for Ultra High Net Worth CEOs and Owners
Don’t Even Talk to Prospective Buyers Before Doing This
You’re ready to cash out from the business to which you’ve devoted a large portion of your life. Very soon, as an ultra high net worth business owner, the emphasis of your life will shift from growing a business to managing and preserving the wealth it has produced for you.
But you’re not there yet. And this last hurdle in your business journey is no simpler than any of the previous ones. In fact, it may be the highest and hardest one of all to leap over and finish the race.
Strategies For Families Worth $25 Million To $500 Million
The Art of Protecting Ultra-High Net Worth Portfolios and Estates
The insights you’ll discover from our published book will help you integrate a variety of wealth management tools with financial planning, providing guidance for your future security alongside complex financial strategies, so your human and financial capital will both flourish.
Clients frequently share with us how the knowledge gained from this book helped provide them tremendous clarity, shattering industry-pitched ideologies, while offering insight and direction in making such important financial decisions.
The Most Important Part of a Business Exit Strategy…
…is not the sale price. That’s what everyone fixates on, but it’s not what will ultimately deliver the satisfied feeling of a job well done and that ‘mission accomplished’ sense of gratification.
Why is that?
Because a good sale price can still leave you with a sour taste in your mouth if the other terms of the deal don’t work in your favor. Your employees will need to process this new transition and adjust to a new leadership style. Your customers may feel the effects of new ownership, and may not enjoy the experience. And many other factors can cause a deal to feel like a failure.
That’s why the first and most important step when selling an ultra high net worth business is to develop an exit strategy.
What’s so unique about an ultra high net worth business?
If your business has produced tens of millions of dollars, or more, then you have a unique opportunity to chart out the rest of your life, how you want to live it, and what you want to do with your wealth.
Conversely, if a mom-and-pop business wants to sell, they’re simply not in the same situation. There’s almost nothing in common.
That’s why we created this checklist specifically for a business exit strategy for ultra high net worth business owners and CEOs.
If that’s you, and you’re getting ready to think about selling and moving on to the next stage of life, then move this checklist to the very top of your to-do list.
Checklist for Developing an UHNW Business Exit Strategy
As you go through this checklist, your goal is to settle four primary issues:
- Your options for your business exit strategy
- Your personal goals after your exit is complete
- The timing of your exit
- Your objectives during the exit process
With a thorough business exit strategy in place, you will no longer feel pressured to chase every opportunity that comes your way, even if the price tag seems too good to pass up. Now, you’ll know what you want, why you want it, and how to respond when an offer comes in.
Let’s get to the checklist.
1. Do I Know Why I Want to Sell?
You might just want to be done working. To truly retire. You could also be done with this venture and ready to start a new one, planning to use your net sale price to fund it. Many other possible reasons could be motivating your decision to sell.
You need to know why, because this affects how committed you’ll be to the process.
2. Can I List the Personal Objectives I’ll Achieve by Selling?
Why did you start your business in the first place? What plans do you have for afterward? In other words, why now?
The first item on this checklist is why sell, in general. This second item is about why now? What are you accomplishing by selling now that you couldn’t accomplish just as well by waiting five more years?
3. Which Professionals and Advisors Will Help Me with the Sale?
You’ll need a team of specialists if you want to get the best possible deal. Your emotions as the business owner will likely prevent you from staying logical, strategic, and measured throughout what can turn into a grueling process.
That’s not a bad thing or a sign of weakness. Even for the most stoic of business owners, you’ve poured your blood, sweat, but no tears (stoic) into this business for many years. You will feel something when the prospect of parting with it becomes real.
Plus you just don’t have expertise in all the areas required to pull off a deal like this. No one does.
Some key specialists you’ll need include a CPA, an investment banker, a transaction attorney, and a financial advisor. We’ll detail much more about how you build this team in a future blog post.
4. Can I Define What I’m Selling, and Who My Ideal Buyer Is?
Are you selling a business, a line of products, an online service? Are your employees part of the sale? Is there any real estate involved? Think through all the elements and assets of your business.
Which ones will your ideal buyer want, and which ones will just fade away?
The more complex the business, the more time it will take to answer this one.
But knowing what you’re selling will help you identify your ideal buyer. Who would want what you’re selling? What kind of business or investor would this appeal to?
5. What Are My Strategic Alternatives?
For negotiating leverage and backup plans, you should have an alternative to your ideal buyer. For instance, what about an internal sale to one or more of your employees or partners? They might actually strongly crave the opportunity to run the show.
And being already part of it, the transition will likely be easier.
As another alternative, you may consider selling to a competitor. Depending on the situation, that might be a great option. Again – this partly depends on your personal objectives for selling. Look back at what you wrote for Item #2.
6. Can I Explain the Buyer’s Synergy with My Customer Base?
What sort of new owner will your customers warmly receive? This matters because if your buyer senses all your customers will flee to the mountains when you leave, they will lower your valuation.
You must consider how your customers will react to the sale of your business.
7. What Is My Ideal Timeline for Completing the Sale?
Have an end date in mind. You might not meet it, but you should start off with a goal date in mind. That enables you to respond more thoughtfully to offers that come in with their own timelines. It also affects your negotiation strategy.
8. How Much Money Do I Need to Net From the Sale?
You’ll probably need help figuring out this number from your financial advisor – assuming they have experience with mergers and acquisitions. But you need to know your bottom line number, the one you cannot go below, to still meet all your lifelong financial goals.
Again, this goes back to your personal objectives and plans after selling. What do you want to do next? This plays a huge role in determining how much money you need to walk away with.
9. Do I Want a Specific Cash Amount, or Am I Open to Terms?
Buyers can come in with all sorts of proposals. Are you open to a deal that strings you along for annual payouts over a number of years, or do you want a lump sum all at once and nothing else?
It’s your business, so you get to decide this. But it’s a critical piece to definitively answer before you talk to a single buyer.
10. Can I List the Strengths and Weaknesses of My Business, from My Buyer’s Perspective?
There’s a lot to think about here too. Customer acquisition methods. Repeat customers. Reputation in the marketplace. Cash flow. Employee satisfaction. Customer service. Many more business elements that your buyer may perceive as strengths and weaknesses.
Know in advance what your best selling points are, as well as the areas they may see as reasons to lower the price or ask for different terms in the final deal.
11. Rate My Commitment to This Process from 1 – 10
If you’re ready to sell, then be ready to sell. If you’re not up for all the paperwork, meetings, documentation, and negotiation this process entails, then you’re probably not ready to sell.
Rate yourself from 1 to 10.
‘1’ means you really aren’t sure about selling but if someone made you an offer you can’t refuse, you’d probably take it.
‘10’ means you’ll travel the globe and even up to the space station if that’s what it takes to land the meeting that will close the sale.
If you don’t find your rating above at least a 5, you might want to put a hold on exiting your business.
12. How Quickly Do I Want to Fully Exit the Business AFTER the Sale?
Some buyers (and your employees and customers) may prefer that you stick around after the sale to help with the transition. Others may not care. But what about you?
Do you want to be all the way out immediately after the sale? That will entail a different transition and negotiation process than if you’re open to working through a transition period of six months or a few years.
13. What Are My Plans After Selling?
You could relax. You could spend time with family. You could travel the world for a year. You could run for office. You could start a foundation. [link to blog 22] You could do any number of things after selling.
This question matters because it affects your need and urgency to sell, as well as how quickly you want to exit the business after the sale – what the previous item was about.
14. Can I List My Must-haves – My Deal Killers and Deal Makers?
Negotiation is all about knowing where the hard lines and the soft lines are. You never open negotations with your hard line proposal.
Before starting this process, and also as you dive deeper with the help of your team of specialists who will probably ask a lot more questions that didn’t occur to you, you need to be clear about which items are non-negotiable.
Otherwise, you’ll reach the end and realize you’re not getting the deal you really wanted. That’s one of the primary reasons deals fall apart at the last minute.
15. Describe My Picture of a Successful Exit
What is your ideal process and outcome? Can you describe that in a short paragraph, or even a sentence? Again, this is about knowing what you want, which you must be clear about before entering any negotiations about price or terms.
16. What Is My Cost of Selling and Exiting My Business?
You’ll have to pay your team of specialists their fees. Do you know what they charge for their services? Do you know about how long you’ll need their help?
As you’re assembling this team, get clear definitions on this item. Lawyers aren’t cheap. Again, we’ll say much more about assembling your team in a future blog post.
17. Do I Have a Tax Minimization Plan?
Exiting an ultra high net worth business means a windfall of cash, either all at once or spread out over a period of time. What’s the government going to have to say about that?
Your financial advisor should have a clear plan for how to minimize your tax bite so you get to keep the most money possible from the sale of your business. It’s your business, not the government’s, so make sure you keep as much as possible.
If your financial advisor has limited experience with business exit strategies, you should get a new advisor who specializes in M&A, even if it’s just to help you for a limited time.
More Help With Your UHNW Business Exit Strategy
If you live in the San Francisco Bay Area, Silicon Valley or the surrounding regions and need a financial advisor who specializes in M&A,
especially for ultra high net worth business owners, schedule a call with Pillar today and see if we’re the right specialist to add to your team.
We’ve done this many times, and we can also recommend capable experts we’ve worked with before who can fill the other roles on your team.
- Wealth Management Nevada – Wealth management Nevada for high net worth and ultra-high net worth individuals is tricky business…
- Wealth Management Louisiana – The best experts offering solutions for Wealth Management Louisiana focus on improving your portfolio performance…
- Wealth Management Colorado – For high net worth and ultra-high net worth individuals, wealth management encompasses various aspects…
- Wealth Management Hawaii – What sets high net worth and ultra-high net worth investors apart…