Every business owner wants to get the best possible deal when they decide to sell their company, but the deal should be good for them personally as well as financially. Joe Hellman invited Julie Keyes to The Transaction Abstract podcast to discuss the role of exit planning in M&A transactions.

An experienced business consultant and the author of the book Poised for Exit, Keyes is a certified exit planning advisor (CEPA). She belongs to the Exit Planning Institute’s Twin Cities Metro Area Chapter. 

Owner Readiness Versus Business Readiness

Julie Keyes has some advice for business owners looking to sell. “When the time comes, owners need to know exactly what their plan is and who they need to get involved.” 

Owners who have worked with advisors throughout their careers as entrepreneurs understand the importance of advisors as they prepare to sell their company. However, many owners are simply trying to get by day to day and keep their business profitable. They do not think about the exit process in advance.

Often, it is a triggering event—a business-related pain point—that initiates the decision to sell. Common triggers include a health crisis or a partner disagreement where the buy-sell agreement is not clear. Other times, the owner is simply tired and does not want to continue running the business.

No matter the reason, many things need to happen to prepare the business for sale. But owners also need to be personally prepared—emotionally ready—for the exit. That takes conscious effort when they have spent most of their lives building their businesses. 

The same primary professional advisors who play a role in preparing the business are also vital to ensuring the owner is properly prepared. Keyes describes her role as that of a quarterback, working alongside the accounting team, legal advisors, and merger and acquisition advisors to help business owners through the process of exit planning so they can achieve the best possible outcome.

For this, they focus on things such as estate planning and tax planning. Keyes says wealth management is particularly important because so many owners have most of their assets tied up in their businesses. They need someone on the front end to help them plan post-sale investment strategies so they will be able to maintain their lifestyles.

Ensuring the Next Phase Is the Best Phase of Life

Ideally, exit planning should begin as early as three to five years in advance. Realistically, Keyes and other M&A advisors may not enter the picture until the expected exit is just a year away. In that case, Keyes says the key is to tighten priorities. “Go with the lowest hanging fruit,” she advises, “things that are going to make the biggest impact in that short period of time.”

The top priority? Answering the question “What am I going to do next? How do I see myself living this next chapter of my life?”

Knowing the answers to these key questions makes it much easier for an owner to get ready to—and get comfortable with their plan to—exit. However, she warns, “It’s important for them to look at the whole picture, not just themselves, because if a business does not transition well, the ripple effect is far-reaching.” It affects employees, vendors, customers, stakeholders or shareholders, and family members.

Starting the exit planning process early allows owners to make more thoughtful decisions and to modify their plans if things change. It also allows for conversation with spouses and with family members who will be directly involved with the transition and may hope to stay involved with the business.

Sometimes owner planning takes a surprising turn. Keyes describes one client who wanted help with a growth strategy, but as they got deeper into discussing the details, Keyes realized their heart was not really in it. She recommended an exit strategy instead, which led to a great outcome.

Ease into the Exit

Because selling a business is such an emotional event, Keyes says having an advisor working alongside the owner on a regular basis—someone they can call and talk to—can make all the difference. For owners who cannot imagine life without their business, she recommends taking more time off.

“See what you can do to step aside from those emotions and think about how great life could be,” she advises. “Delegate. Don’t let that role that you have been so dependent on lead you to believe that no one else can take charge.”