Some Business Owners Exit Rich – But Many Can’t Exit
While most publicly traded companies are operated with a focus on company value as represented by stock price, most entrepreneurial and family-owned companies are operated to optimize profits and support the owner’s lifestyle – not to maximize the company’s value.
This issue is addressed in Exit Rich, the bestseller by M&A advisor Michelle Seiler Tucker and Sharon Lechter, finance expert and co-author of Rich Dad Poor Dad. Exit Rich focuses attention on a significant challenge many business owners run into when they are ready to retire or sell their business – their business is not worth as much as they thought it was worth.
Exit Rich contends that too many business owners put off planning for the sale of their business until the last moment – or until the sale is triggered by a catastrophic event, including partner disputes, pandemic, divorce, or death.
The Exit Rich authors make a very strong recommendation: “It baffles us how people will get their car inspected and get an annual health checkup, but they completely ignore the health of their business until they are ready to sell. In most cases, our business is our most valuable possession. It’s our nest egg, our retirement plan, but it’s also the most neglected asset we have. Because of this, we need to check on it throughout its lifetime – not just at selling time.
“You must work with an expert M&A advisor on an annual basis to look under the hood of your business, determine the current value, and inspect the value drivers. After the inspection, you must tune up what’s necessary to drive on the path to your final destination.”
In an interview, Sharon explained that the dream of most business owners is to exit their business rich, but most owners do not exit rich because they have not built a foundation that allows them to sell their company for maximum value. She adds, “they focus on profit and sales and not on the foundation like operation systems, competitive advantages, and the hidden value in their company. Too many business owners own a job, not an asset.”
In the introduction to Exit Rich, Michelle Seiler Tucker says, “. . . startling statistics have caused me to realize and fine-tune my real passion of saving businesses and of saving the owners and their families from losing their personal assets. Unfortunately, eight out of ten businesses do not sell for a multitude of reasons. This is horrible news for most business owners because many of them have to sell their business for pennies on the dollar, close their doors, and – even worse – file for bankruptcy and lose everything!”
We don’t see many businesses having to be liquidated or filing for bankruptcy if they don’t sell – but we do see a lot of business owners being forced to continue operating their business instead of cashing out when they want to – and eventually having to sell their business for a lot less than they ever expected to.
By Bruce Skaistis
Corporate Performance Group and Waypoint Private Capital have teamed up to help business owners avoid this trap by increasing the market value of their business – and monetizing maximum value when they retire or sell their business. Learn More