The Book Preview

Foreward

I wrote Prepare2GROW. Prepare2EXIT. for privately-held and family business owners. For the balance of the book we’ll refer to them, male or female, family or non-family business owners collectively as Privately-held Business Owners (PBO’s). The purpose of our journey is to provide a reference for a PBO and their professional advisors, successors and significant others. It’s designed to offer insights and practical tools for that moment the owner considers the question, “Shall I hold and grow the business, or shall I exit?” We call that a Transitional Moment. For those contemplating Transition, you now have a preparation guide for the journey. For those in the midst of executing a Transition it may assist you from falling into chasms of delay, or provide a reality check on your process or expectations.

Why this business topic? There are two reasons. The first is that in the next fifteen years there will be a shifting of privately-held business ownership like the United States has never seen before in its history. It’s been called by some authors as The 10 Trillion Dollar opportunity. Demographics of Trailing Boomers indicate that a new generation of business successor will be leading America’s privately-held business renaissance, where 85% of new jobs are created.

Of the 6,000,000 or so privately-held business in America, a large percentage will transition as sales to a third party — financial buyers, private-equity groups, groups of private investors and strategic industry buyers. Some will also be sold to insiders, family members or key employees. And many more will be an acquirer of value-added products and services. But many businesses will just die. We can all count on a shrinking supply of qualified buyers with capital. It’s in the demographics. That creates a significant problem for PBO’s seeking to exit. And that brings me to my second perspective.

Being a PBO is more challenging than ever when considering how our business may rapidly be affected by forces beyond our immediate control. Healthcare, regulation, taxes, terrorism, financial markets, offshore…the list can be endless and daunting. Therefore, we must concentrate and confront what we CAN control using collective wisdom to traverse what we call the “Bridge of Transition” — crossing it successfully from surviving to flourishing. We utilize this bridge metaphor because it infers a desire to get from one reference point to another on a journey.

History may coin late 2008 and 2009 as the 2^nd Great Depression in the fallout of greed, lack of investment governance, a lack of investor confidence and nearly out of control financial systems. More recent is heavy-handed federal regulators that have shut down the banking markets for capital to be deployed in business growth or exit. We wait on the surviving side of the Bridge of Transition for signals to cross. Our American Dream to reap rewards from being in business is being re-shaped by events out of our immediate control. It’s time to accept accountability to re-shape our expectations, understand the new business world model and prepare to cross the Bridge to flourish.

No longer are operational, technical and financial know-how sole requirements of business success. Flourishing in the next five years takes on a new perspective. Matter of fact, we’ve seen that one can be the most technically competent PBO and still not survive. We believe markets will reward those who breathe new life into their businesses through innovation and preparation and display that they are prepared to grow or exit.

Productivity and efficiency, cutbacks, layoffs and cost elimination of the past 10 years found us swimming in savings from waste. No more. We’ve done most of what we needed to do to gain the big dollars and low hanging fruit. If we hadn’t we probably aren’t in business. Today, there’s a growing need for understanding why we are a PBO, where we invest our time and how we prepare for a Transition, initiated or thrust upon us.

It’s important we establish a path towards the Bridge of Transition. It can be our decision, or forced upon our successors or loved ones who are suddenly faced with it. Since most PBO’s have 80% of their wealth tied up in their business holdings, it’s a very relevant topic…just ask your significant other, management team or family members. Every PBO expects to reap the rewards of all the time invested, hard work and risk. The new rules of flourishing in business, as dictated internally or externally require savvy preparation to capitalize on Transition.  

Therein, we outline the process of Business Transition as we’ve seen it occur successfully in further detail. And as a process depending upon people and the uniqueness of every business, it’s dynamic and being shaped with every new Transition. Simply put, a Transition we describe typically starts with executive sponsorship by the PBO, the champion desiring to prepare for change. It may or may not include trusted team members like a COO, CTO or CFO. Oftentimes, until the Plan becomes clear, it isn’t revealed to professional advisors — a common mistake. Most importantly, Transitions are small steps that over time get the PBO and business prepared to execute growth or exit. Deciding when to cross the Bridge requires an outlook that includes right timing and strategy.

For instance, there’s a current window of opportunity over the next 2 years in the marketplace to acquire like businesses or added product or service lines. Most management teams have their hands full in operating the business profitably and keeping their focus on the business as it is already defined. An acquisition takes preparation, resources and time. And of course there’s the all important value of post-integration of the assets and human capital. Equally, an exit strategy also takes time to successfully execute, from 9 to 24 months. So the lesson here is that taking the time to prepare pays off in dividends later when the timing is right.

In closing, survival in business is an existence, not a life. Most PBO’s want their investment of time at work to be meaningful. Beware of a response to resist and take a wait and see attitude because it takes too much time, or it really doesn’t matter. If you’ve had a passing notion in the past 5 years to hold and grow or exit, you need to start on this path of Transition now to cross the Bridge at some point down the road. Our insight is that value stems from preparation. You’ll also find that having a veil of the unknown lifted is rewarding. Clarity of purpose, direction, options and outcomes emanate from the adventure.

So thanks for joining us on the journey of Business Transition. We promise it will be one you remember!

Yours in Transition,

David

Acknowledgements

For my wife and dearest friend Toni, who provided me reasons to persevere.

For my children and their spouses who encouraged me to pursue my dreams.

For my parents Bill and Janet from whom I received gifts of finance and creativity.

For my deceased grand parents who loved me for being me.

For Shiela Audet and George Withers who guided me along my writing journey.

For my coach and dear friend Jeff Klunk who inspires me to grow as a soulful person.

And for Robert Everett, Phd. who encouraged me to write and write and write.

To all the Privately-held Business Owners, their spouses, families, successors and team members who entrusted me as a guide and mentor to transcend challenging financial and business situations.

To all, I am eternally indebted with gratitude for my relationships. In one way or another, you have impacted me by our crossings.

Table of Contents

The Road Of Preparation for Transition

Chapter 1 - Understanding The Path & Power of Transition

Chapter 2 - Embracing What We Most Resist

Chapter 3 - Why There Is No Cookie Cutter Solution

Chapter 4 - How Others May Respond To Preparation

Chapter 5 - What’s The Payoff?

Chapter 6 - Who Are The Ones We Wish To Impact?

How To Initiate Transition

Chapter 7 - How Crisis Is Managed Without A Transition Plan

Chapter 8 - Proactively Organizing Your Business Matters

Chapter 9 - The Financial Markets for Privately-held Businesses

Chapter 10 - How Your Banker Views Your Business

Chapter 11 - Where Advisors Can Assist the PBO

Outlining The Transition Plan

Chapter 12 - What Do You Want?

Chapter 13 - What Is Possible?…Today & Future

Chapter 14 - Financial Modeling — The Business Vision

Chapter 15 - Understanding Value

Chapter 16 - Leadership & Followership

Chapter 17 - Assessing Options

Crossing The Bridge of Transition

Chapter 18 - Now That The Business Is Prepared

Chapter 19 - The Rollercoaster of Emotions

Chapter 20 - We Forgot To Tell You

Chapter 21 - What Happens When You Are In The Middle

Chapter 22 - Trust Me From Observing

Chapter 23 - Negotiations Are Perceptions

Chapter 24 - Keeping Promises

Reaching The Transition Threshold

Chapter 25 - How Do You Feel — Buyers Remorse Or Sellers Regret?

Chapter 26 - The First 100 Days

Chapter 27 - Take Time to Relish The Accomplishment

Chapter 28 - Building On The Next Transition

Epilogue - Post-Transition Integration

 { More To Come! }