Thursday, October 13, 2005

Knowing when to get out

Did the title get your attention? Actually our lesson today will deal with exit strategies. We've heard many stories here on the Gulf Coast from business owners who are weighing the costs of rebuilding their business versus selling the land and skipping town.

I mentioned previously how most of the people we've met with are in generally good spirits. They've already made the choice to stay here and are now at the point where they're ready to dig in and get to work.

A few others are still on the fence, and they seem much more stressed. This tends to be the case when someone is getting on in years and thinking of cashing in their chips rather than using their nest egg and starting over.

When counseling someone who is just starting a business, I like ask them questions regarding their "exit strategy". For example:
1. How long do you plan to operate and be a vital part of the business?
2. When you move to the next phase of your life (ie. retirement), what will happen to the business?
3. When you decide to get out of the business will you sell it to partners or family members, sell the business before the business approaches a downward part of its business cycle, or simply sell the assets and move on?
4. When will the benefits of running this business no longer fit into your overall life plan?
5. If you make an early exit and die (the extreme exit), what will happen to the business and those who are left? How can the risks to others (employees, bank, suppliers, investors) be minimized?

As we continue with this business lesson, let me say that most people don't ever consider how they will get out of business before going into business.

This has become even more real and more important here in Mississippi, when people lose buildings, customers, equipment, paperwork, and years of hard work in a hurricane.

So, what's the moral of the story? Think about what conditions would cause you to not want to be in business anymore, and have a plan in place for making a graceful exit.

My Dad, Peter Wendel is an expert in this field, especially in dealing with the succession issues of family businesses. I'm sure that along the line I've picked up a lot of skills that I use everyday from listening to him. So here's my shameless promotional plug (and free counseling session) for today.


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