Listed below are three reasons why you should think about starting the planning process in 2015 for developing an exit strategy for your business. We hope that this is helpful towards encouraging you to start planning for this critical transition for your company, whether the actual event will happen in the next year or the next ten years.
The future owner of your business will ultimately care about two (2) financial components related to your company’s performance. First (1) the future cash flows and second(2) the [perceived] risk of receiving those cash flows into the future. For this reason, each additional year that you can show a trend towards improved performance is one more arrow in your quiver to argue for – and defend – a higher value for your business upon exit. This is particularly important if you need that additional value to meet your personal financial goals. You may be like many owners who have seen profitability restored for many years now, and it may be time to consider harvesting values (in whole or part) while they are attractive.
According to online database PEI Services, there are currently 2,474 private equity groups that own 56,943 privately-held companies (dtd 11.22.14). The basic formula for many of these private equity groups is to buy a ‘platform’ business and buy additional companies as a growth plan. With hundreds of billions of dollars in available capital for acquisitions (a.k.a ‘dry powder’) and a business model of growth through acquisition, there is a high demand for privately-held businesses.
Exiting a business is a complex process. To fill the needs of “exiting” owners, the ‘exit planning’ industry is growing at a dynamic rate. “Exit Planners” are a new breed of consultants who are adapting and building their business models around servicing this particular need to coordinate various planning issues while using advanced technology and analytics.
More and more owners are seeking advisers who have access to tools and support to assist them with this critical planning process. Ask your advisers what specific training they have in this area, the resources available to them, and the technology they use to support their planning process. Your exit planning adviser should have the vision, creativity and tools to help you arrive at your desired destination.
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