Imagine yourself in a darkened theater preparing to see the preview of a new play about the life cycle of a fictional family business. The playwrights and producers are the entrepreneurs who founded the company and their employees are the actors. The play consists of four acts with an encore. This play takes place in a suburb of Milwaukee.
Act One: A husband and wife are sitting at their kitchen table discussing the possibility of starting their own business. They are imagining who would be their customers and how they would cultivate these relationships. They know they are taking a chance by giving up their current positions and venturing into the unknown. They decide to take the leap, and the entrepreneurial stage of the company’s life cycle begins.
Act Two: As they enter the growth stage, the husband and wife begin to market their business to potential customers. They acquire small books of business, and as the volume grows, they begin to acquire office space and hire their first employees. Year after year their volume of business grows and so does their staff. They begin to upgrade their staff in order to acquire large and more involved projects. As their staff and business grows, they require more capital and they build ongoing relationships with local financial institutions. It soon becomes obvious that they need a business plan and hire a consultant to aid them in its development and implementation.
Act Three: The business quickly enters the rapid growth stage. The need for team leaders and a more formal structure becomes obvious. A leadership team is formed, and job descriptions are formalized. The company soon grows out of their existing space and a larger facility is acquired to accommodate additional equipment and employees. The roles of each employee become more defined as more projects are handled by teams. A number of new employees are added in order to meet the demands of the additional business. The husband and wife now assume the roles as president and chief executive officer and become the face of the business. Their reputation in the greater business community grows as they take on larger more complex projects.
Act Four: As the business begins to enter the mature stage, and the rate of growth slows, the founders begin to consider the next step. It has been more than 30 years since they started the business, and they want to reap the benefits of their labors. They begin to consider a number of potential exit strategies. They could sell the business to a competitor or to a member of their management team. Their desire is to keep the entity intact, while rewarding the long-term employees for their loyalty. After much introspection, they decide to sell to a senior member of their management team.
Encore: The owners agree to stay on for a period of time so the business relationships that have been cultivated over the years remain intact during the ownership transition. The business is now being run by the new management team, with the previous owners acting as mentors and advisors.
So, what is the purpose of this dramatization? It is to illustrate the importance of having a carefully thought-out exit strategy for your privately owned business.
It is also critical that you involve experts in your planning, such as attorneys, financial planners and a firm that specializes in acquiring potential suiters for your business. You want to develop options that are best for your team and your employees. This planning is not to be last minute but one that should have been developed over a long period of time. Your goal is to achieve the maximum payback for your years of labor and dedication, and when the final curtain comes down, it’s to a standing ovation.
