Yesterday, we've looked at my own personal example of exit planning, and how being forced to strategize for a potential exit ended up serving us well in growth mode.
Today, we are going to explore three ways that exit planning might help you grow:
Organic growth via better organization.
Strategic acquisition.
Divestiture of a non-core holding, allowing for better focus on your most profitable business.
Now, we said on day one - and we will repeat this often - the quote from Chris Snider of EPI: “the things that prepare you for exit are the same things that prepare you for growth.” And on day 2, I showed you how this was proven true in the case of our own practice. But let's dig deeper into three ways that Exit Planning double s as growth planning.
Preparing for exit organizes you for organic growth: Let's suppose that you spend the next 6 to 8 quarters in a row polishing up your contracts with vendors, standardizing your HR processes, optimizing your tax- and cash flow situations, and developing your senior leadership team. Well, now you are in a better position to go after larger contracts (organic growth) and increase wallet share of the clients you already serve because you are hiring better in HR, you know how you will be funding these growth initiatives (cash flow), you know how and why you will be keeping more of the profits (tax optimization), and you don't have to do it alone (senior leadership team). If these kinds of improvements were happening inside the business, you would be just as ready to stay and grow as you would be to sell and go.
Preparing for exit positions you for strategic acquisitions: This is happening right now inside a couple of companies of our clients. When they initially embarked on an inquiry into a potential sale, they soon discovered that they were in a better position to be the buyer, and to acquire competitors or firms in complementary industries. In these cases, a potential exit is still a regular part of discussion, but they are improving their prospects of these exits by having a larger more organized and dominant enterprise to bring to market in the future. You also know this is true from the flip side. How many times have you heard a friend in business say (or said it yourself) That you cannot afford to grow right now because the business that you already have is crazy enough? This phenomenon is not new in small to mid size businesses. The disciplined thrive, while everyone else struggles to survive.
Preparing for exit clarifies your focus away from non core holdings, toward profitable business: Years ago, a friend of mine was consulting for large construction company in one of the largest cities in the US. For years, they had been servicing what they thought were amazing municipal government contracts. After he helped them account for all the true costs – real and hidden – that they incurred by servicing these contracts, he was able to show them that the municipal line was actually one of their least profitable lines. This naturally led them to ask, “Well then, who IS our best client, if it’s not the city?”
If you suspect you’d find something similar if you examined your own business lines, you might uncover an opportunity to sell off a portion of your business, which has the double bonus of a) infusing some cash into your enterprise, and b) freeing up the valuable time of your team to focus on the parts of your business that actually drive results.
These are just three ways that “exit planning” can position you for growth. There are plenty more that we’ll dig into over the course of this journey. Tomorrow, I will write more about exit planning. For now, if you have found this helpful, I would be super grateful if you shared it with someone else like you who can benefit from it.
See you tomorrow!
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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