Issue 29

First Things First: Prioritizing Your Objectives

"You've got to be very careful if you don't know where you're going, because you might not get there." –Yogi Berra

It is not always easy to interpret Yogi. In this case, perhaps he is advising you to figure out just where you are headed in your businesses. As you near the time when you will leave behind the daily worries and stresses of business ownership, have you defined your successful exit? Because most owners haven't defined where "there" is, they don't know how to get there. Unless you prioritize your exit objectives, you will have too many objectives, they will conflict and you will make little headway.

The clearest example may be Bill Wilson, a business owner who recently told his attorney that: he wanted to leave his business within three years, be financially secure, (which meant for him to continue his current lifestyle) and transfer the business to his key employees. He was ready to leave immediately.

A quick review of Bill's personal financial statement, however, revealed that most of the income required to maintain his lifestyle would have to come from the business. His business wasn’t large enough to attract a cash buyer. And, since Bill had done no Exit Planning, his employees had no funds with which to purchase his ownership interest. A long term installment note seemed to be the only answer—a risk Bill was unwilling to take.

Contrast this last resort solution with Bill's objectives—objectives which could have been achieved had he taken the time (well-before he wanted to leave the business) to establish and to prioritize his Exit Objectives.

If, for example, the need for financial security predominates, selling a business to a third party for cash may be the best and quickest exit path.

If, however, attracting a qualified third party is unlikely, more time will be needed to devise and to implement an exit strategy that provides both cash and a transfer to an "insider" (child or employee).

On the other hand, if transferring the business to the persons of your choice is more important than your need for financial security, and your timeline to leave the business draws near, financial security in the form of "up-front" cash must take a backseat.

As you can see, the three primary exit goals listed below must be considered simultaneously. Ask yourself which is your most important exit objective. Rank your answers from 1 (most important) to 3 (least important).

  • Financial security:
    1 2 3
  • Transferring the business to the person of my choice:
    1 2 3
    (may include key employees, co owner or child)
  • Leaving the business when I want:
    1 2 3
    (could be immediately or never)

Prioritizing your objectives will help you fix your overall path. For example, if you want out soon with cash, but your business cannot be sold today, do you wait until market conditions improve or sell now to your employees? While prioritizing your objectives is not easy, it will make decisions like this much clearer.

Print this issue of The Exit Planning Navigator® so you can complete the rankings above and share this information with members of your Advisory Team.

One final word of advice: Solicit the input of your Advisory Team as you work through these decisions. It is a good idea to get a fresh set of eyes or an experienced mind to help you to balance these competing objectives.

Subsequent issues of The Exit Planning Navigator® discuss all aspects of Exit Planning.