How to Develop your “Business Exit Intelligence”
Entrepreneurship, innovation, talent and cash flow are not enough for your commercial success. As a founder, business owner, investor or advisor, you need to develop and implement ‘business exit intelligence™’ for your ‘smarter business exits.’ By keeping an eventual exit in mind, you can develop your own ‘design thinking’ to give unique context and insight during each phase in your enterprise’s lifecycle.
Using your ‘business exit intelligence,’ you can achieve a successful and jointly profitable exit with vision and clarity. Without it, you can easily fail to achieve your potential as you face customarily foreseeable conflicts, deadlock, litigation, oppression of minority owners, business disruption, loss of value and even liquidation.
How do you develop your own framework for smarter exit planning for a future change of ownership, control or management? This article explores the ‘emotional intelligence’ needed for your ongoing business from start to exit. It explores challenges in developing a business owner’s thinking processes affecting personal, family and business life.
Classic ‘emotional intelligence’ involves four elements: (1) self-awareness (identifying one’s emotions, setting emotional goals and self-motivation), (2) self-regulation, (3) social awareness (using deep listening, empathy and supportive interactions), and (4) conflict management skills.
Applying emotional intelligence throughout the business lifecycle, transformative strategic thinking can overcome internal conflicts and preserve enterprise value for all stakeholders. In a joint enterprise, mutual alignment, reciprocal commitments, collaboration, effective communication, foresight and hindsight will determine the level of success upon exit.
In exit planning for privately owned businesses, such emotionally informed thinking identifies foreseeable scenarios across three components:
Business exit strategies
- ‘Business exit intelligence’™ promotes effective relationships among owners and with all stakeholders for a smooth joint exit. Such intelligence addresses all forms of any change of ownership. This variation of ‘emotional intelligence’ focuses your emotional awareness on aligning goals with others for successful joint exits.
- ‘Business divorce intelligence’™ (also known to as ‘corporate divorce intelligence’™) addresses the particular situations of a hostile or disputed exit by a co-owner. Business divorce intelligence can help achieve better financial and emotional results without destruction. This variant anticipates the full array of potential hostilities among co-owners and other stakeholders with a view to avoiding or mitigating derailments such as deadlock, mutiny, blackmail and litigation.
- ‘Succession planning intelligence’™ concerns the process of transition of business management from one CEO to the next. Such transitions may involve a change of ownership or “control.” Or they could be just another aspect of a family’s continuing intergenerational ownership and control of a family business already transitioned to a family holding company or trust. When the founder moves away from day-to-day control, others can learn, adapt, plan and build for the next generation’s future.
Consider a checklist for developing your business exit intelligence and related emotional intelligence frameworks.
Strategize! Your smarter exit via joint business exit, individual business divorce, succession or other liquidity event must fit within your other enterprise-wide strategies. The success of your enterprise-wide strategies for product development, supply chain and logistics, marketing, technology, finance, human capital and governance are all judged upon an exit or succession event. So all strategies coalesce and culminate as you approach any exit or succession.
Design across the full business lifecycle. This book is offered to apply iterative organizational design to avoid or mitigate many stumbling blocks of being an owner of a closely held business. By designing your enterprise and your legal relationships to mitigate the disruption of separating from your ‘partners,’ you can build a collaborative, adaptive, agile and sustainable future. Design is an ongoing process in the business lifecycle, from conception to organization, capitalization, recruitment, funding, product development, alliances, growth and eventual transfer to others in a ‘change of control.’
Anticipate changes. With business exit intelligence, you can make wiser decisions and responses on shareholder strategies and structures. You can create and preserve value and your sanity in a business exit or succession. So you might ask: ‘How can you design and manage your business entity to optimize the value to the co-owners and plan for eventual change of management or change of any or all ownership?’ By anticipating and planning for potentially ‘business exit’ and ‘business divorce’ scenarios, entrepreneurs, investors and managers can adapt to unfolding events. Far-sighted individuals can even look beyond the particular business for their personal ‘encore,’ as serial entrepreneurs, private equity investors and interim managers do.
Protect adaptively. The shareholder value of your company is vulnerable to many threats. This book takes a holistic view of business exits by identifying many threat vectors that imperil harmony, business continuity and resiliency throughout the business lifecycle. Beyond vulnerabilities and conflicts among owners, threats arise from other stakeholders, digital transformation, online merchants and disruptive online business models.
External threats exacerbate intrinsic conflicts among owners. Threats pose the greatest risks just when you want to retire or sell the business. Your ability to defend against threats depends on your prior risk management, mitigation and resiliency planning. The best insurance is to plan the exits at the start of any business relationship. Then, with adequate protections, exit events can be managed for enterprise continuity. A well-planned succession or exit can realign and rejuvenate the players.
Think like a pro. Many ‘lessons learned’ for economically efficient business divorce are practiced daily by professional investors. For owners of closely held businesses, this book provides insights into key strategies and practices for corporate renewal, growth, liquidity and sustainability that such professionals deliver every day.
Learn from key lessons, or ‘golden rules.’ Lessons learned by others can help you achieve longevity, sustainability and thriving success for your privately held businesses and your diverse stakeholders. Armed with business exit intelligence, you can avoid fatal problems (and high enterprise mortality) stemming from insufficient planning, execution, monitoring, growth and ownership transition. If every business owner and stakeholder were to adopt some of these golden rules, this might improve economic growth, the profitability and sustainability of entrepreneurial private enterprise and reduce business failures.
- Start Now. The first golden rule in design thinking is to plan now for a succession, a joint business exit or a ‘corporate divorce’ without destruction. Failure to plan is just a plan to fail.
- Don’t Stop. The last golden rule is to continue the planning process. Your company’s value depends on ongoing good governance, compliance and risk management (‘GCR’) to deal with volatility, threats, complexity and ambiguity. Your company faces disruptive digital competitors, risks of safety, security and duties to third parties generally. You might have succeeded over the years at building enterprise value, but you cannot achieve liquidity without ‘smarter business exits’ from multiple perspectives.
Move from volatility to vision. Hopefully, your journey in developing your own ‘business exit intelligence’ can help you replace volatility with vision and value, uncertainty with understanding, complexity with clarity and ambiguity with agility.
Start Your Journey. You can develop such succession plans, exit strategies and alternatives on your own. This can be overwhelming. As a busy entrepreneur, you might have no starting point, no time or no schedule for exit planning. Alternatively, you can hire a professional advisor as coach, mentor, corporate advisor, legal counselor, clean-up crew and prep-for-sale consultant or mediator to advise and implement ‘business exit intelligence’ strategies. So ask yourself today, do you have a plan, and how do you want to achieve it?
This article is adapted from the author’s book, William B. Bierce, Smarter Business Exits: Strategies and Toolkits for Corporate Divorce, Succession Planning and Joint Exits (Leaders Press 2020), available at Amazon. The book helps readers navigate roadblocks and forge successful exits. It outlines strategies across disciplines including corporate governance, family governance, succession planning, legal compliance, accounting, valuation, tax, employment, intellectual property, supply chain management, dispute resolution, wealth creation and planning, asset protection and insurance.© 2020-2021 William B. Bierce. All rights reserved.
As attorney and advisor to owners and boards of directors, Mr. Bierce provides legal and business consultancy services from startup to “finish-up.” He counsels on organizational structure, business transactions, exit planning and resolution of stakeholder crises. For free e-books on exit planning for international companies and on pre-exit restructuring strategies, see https:///smarterbusinessexits.com.