Best ‘Profitable’ Business Exit Strategy for 2013? Part 1

 What Is the ‘Best’ (aka Most Profitable) Business Exit Strategy Going in 2013?

Another question might be ‘who’ has the best exit strategy? It may even be in the war chest of your favorite accountant or business attorney. Who knows?

The QSBJ will look to plumb the depths of Quad State business professionals in search of the ‘best’ one for you and your needs. If you would like to participate with us—either having your own ideas or refer your accountant or attorney, contact us at ReaderService@QuadStateBusinessJournal.com.

We hope to introduce you to the exit strategy players in the Quad State region in this column so that you can plan accordingly.

One ‘truth’ I have found surprising in the professional services world in working with clients over the last 40 years is that the accountant or attorney that you ‘grew up with’ in your business, may not be the best to employ for your exit strategy.

In fact, it might even be the worst thing you could do for your family’s future. Why? We will not venture into the topic now, but one thing you need to do is ASK your professional, “How many business exits have you done for your clients?” Then check up on their answer.

Thinking About Leaving Your Business

Of course you will want to plan…if you can. Every aspect of strategic thinking must be employed and illuminated by what the owner plans to do with his or her business.

This, then,becomes your exit strategy. You have employed strategic thinking all along your business journey over the years—why stop now?

However, just because you have built a successful business, opened up new markets, developed many unique customer-focused products and services over the years, that doesn’t mean that you can become rich from selling that business.

We have got to keep our feet on the ground here and cognizant of our changing target marketplace(s).

Getting the right professional(s) involved, even it is an emergency exit for a family emergency or divorce, will make all the difference in the world.

Would Your Business Fit the Website Flipping Model?

Not to say that it has to, but there should be at least an element of a ‘transferable to online’ aspect to your business in today’s market. Many Internet entrepreneurs are into flipping (selling) websites and make an extremely good living at it.

Many of our entrepreneur class—who just love creating businesses—have moved into this Internet-only activity. This is where they find a niche market, develop a website, build traffic and sales, and then flip it at a nice margin. It’s a win-win activity.

Sometimes entrepreneurs are so adept at finding good niches, that they can flip a website for a chunk of change without the website even producing sales!

Hence, one of the things we will be looking at in our time together in this section is the degree that a) your website produces sales and/or leads for your main business; and b) what is the trending on your business/site.

Google Analytics (the free version) makes it tough to dazzle someone with footwork as you may be able to do on the other parts of showing them your business. Buyers can SEE whether your site is bringing in sales and leads—or not.

A Profitable Publisher Cannot Find a Buyer—Why?

Most exit professionals will start by having you make a five-year plan. This is primarily for tax purposes and the new buyer. Both the IRS and the new buyer (well, the larger buyers anyway) want to see how much in taxes you have paid each year.

A small book publisher in Maryland, for about 20 years, had an extremely profitable business creating books for a niche market.

The owner wanted to sell out and move to Florida. He had the resources where he could have just shut down the business and moved, but he wanted to see his ‘business child’ continue with life.

Several large publishing houses in New York were very interested. He thought he had hit the exit strategy lottery. He even had visions of a bidding war for his business.

His business had revenues between $300,000 and $1,000,000+ a year. As the owner got older (into his 70s), he refused the most lucrative business gigs offered him as he no longer wanted to travel outside the USA to meet with clients.

In fact, after he turned 70, he refused all speaking or client engagements where he had to travel. Yet the business still brought in revenues around $400-$500,000 a year (with no website). Plus, prospective buyers knew that there are very healthy margins in the book publishing biz.

His asking price? Only $100,000.

In the end NO large publishing houses bought his business. In fact, no other ‘larger’ firm that was very motivated before even wanted to negotiate with him after they saw his financial information.

Why? He simply took every deduction that was available to him as a sole owner so that he would NOT have to pay income taxes on the majority of those sales. What is wrong with that, you ask?

It simply means, and you numbers people are jumping ahead of me, that his business—although very profitable to the owner (having his business provide the only ‘stick’ home for a long time in the exclusive Glenelg, MD area among other accouterments)–was NOT profitable to buyers. Why could they not see it? Because he paid little or no taxes.

Had he thought through his exit strategy through more carefully, he possibly could have focused on his niche audience for a buyer.

The large publishers were looking for profitable businesses. He would probably have found a nurturing buyer/owner in his own niche list of customers who knew the true value of his business.

So Where Do We Go From Here?

In our next installment in this column, we will go over the five (5) exit strategies—and maybe see what some of our Quad State exit talent have to say on this subject.

Stay tuned!

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About Steve Lanning

Steve Lanning is a nationally recognized entrepreneur who has been creating his own paycheck since 1975 and loves to help others do likewise. As the founder of both the National Association of Business Coaches (sold in 2002) and the Consultants National Resource Center (for all marketers of professional services), he and his family have lived in three of the four states in our Quad State region. His passion is to see individuals and small businesses, start-ups to mature, discover and promote their strengths in building revenue streams individually, that, collectively, make for a strong region as reported on and celebrated by the Quad State Business Journal. He can be contacted at AdviceMarketing@gmail.com.

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