Are You Ready To Exit Your Business?

10 Ways to Check if you are Ready for a Business Transition

What does ready mean? How do we define ready?
Below is a set of 10 simple statements to help owners determine what they need to accomplish to be prepared or “ready” to transition their businesses. Use this as simple checklist.  You are “Prepared” or “Ready” to transition your business if you…

❏ Have spent some time and money getting educated on the process of how to transition your business. You have discussed transitioning with your loved ones.
❏ Your personal, financial and business goals are aligned meaning they are
defined, co-dependent, and linked.
❏ You have created an advisory team which includes at minimum: an attorney, CPA, wealth or financial advisor, exit advisor, spouse or partner or other family who is a “significant other” in your life. Other advisors that may be included: personal friends and advisors, banking advisor, M&A attorney,
estate planning attorney, real estate attorney, business attorney, ESOP
specialist, tax specialist, insurance specialist, foundation / charity, key
employees, investment banker or business broker, board members, family or
personal counselor.
❏ You have created a contingency plan which should include buy-sell
instructions, appropriate insurance, and specifies what should happen if
before you transition something was to happen outside of your control that
would prevent you from operating your business or unwillingly force you to
transition. You have reviewed this plan with your trusted advisors including
family members and/or partners if applicable.

❏ You have a completed a strategic analysis, business valuation and personal, financial and business assessment(s) within the last year.
❏ You have considered all of your exit options and optimum deal structure and
weighed the pros and cons of each in relation to your stated goals and
❏ Your transition plan is written and includes goals and objectives, clearly
defined tasks and accountabilities, definition of your transition team,
definition of your transition process, a plan leader or project manager,
timelines, a budget and your role before and after transition. This plan ideally
has a multi-year implementation timeline.
❏ You have considered and designed a post business life-after plan. This plan is linked or part of your wealth management plan which has been prepared by a professional financial advisor and if applicable, estate planning attorney, insurance specialist, tax specialist and charitable foundation specialist.
❏ You have a pre-transition value enhancement / preliminary due diligence
project underway to de-risk the business, maximize its value, minimize taxes
upon transition and improve the probability of a smooth transition to the next owner including family, partners, or employees if applicable. Family
transitions should be treated no differently than other transition options.
This plan ideally has a multi-year implementation timeline.
❏ You have a management program underway to ensure the post transition
leadership is prepared to operate the company after you exit and secured the appropriate specialists to handle your desired transition option.

Retirement is more complicated for owners of business, land, or property.

It can be even more complex for owner-operators.

Business owners that want to pass their business down, or keep it forever… well, they sometimes forget that financial planning aligns your intentions and your resources, whatever they are. It is not about investments, insurance, taxes, or spreadsheets… it is about wise choices.

If you are passing your business down, you want it to be in just as good of shape, as you would if you were trying to sell it strategically.
To do that, it is important to get some diagnostics from an objective outside party. Your secession, contingency, and exit preparedness plans might be fine the way they are. But are your personal, legacy, estate, tax and family plans working with your business plans… or are they grinding gears?
You wouldn’t give your daughter a car that wouldn’t go into 5th gear. You wouldn’t give your son a boat with a motor that could get him stuck in the middle of the lake, would you? Don’t give your family the same headaches you have.

If I know anything about you, it’s this… you want to take care of your family better than you have taken care of yourself. So, start exploring your options 5-10 years before you intend to exit. It usually takes about 3-5 years (not 3-5 months) to exit the most successful ways.

There are many paths that and owner might take to either retire or exit form the business. It is important to realize there are different combinations of roles. About a quarter of small business owners want to retire from operating the business, but want to keep ownership. There are also many that want to sell it and completely walk away. Some see either using it up, or selling but remaining as the operator as the right thing. 
More often a hybrid approach of multiple strategies produces the best overall outcome for the owner, the family, and the business. It all depend on your situation, your values, and your intentions.

The Psychology of Human Misjudgment, by Charlie Munger

The Psychology of Human Misjudgment is a great speech given by the legendary Charlie Munger. He explains how behavioral psychology can be applied to life, business, and problem-solving.

Here Charlie lays out the 24 Standard Causes of Human Misjudgment, with wit and wisdom.

You can find Poor Charlie’s Almanack: The Wit and Wisdom of Charles T. Munger Here.

“This book is something of a publishing miracle—never advertised, yet year after year selling many thousands of copies from its Internet site.”
– Warren Buffett

SCARF Social Model

The SCARF model is a way to explain the way people interact socially.

The model is built on three central ideas:
1. The brain treats many social threats and rewards with the same intensity as physical threats and rewards.
2. The capacity to make decisions, solve problems and collaborate with others is generally reduced by a threat response and increased under a reward response.
3. The threat response is more intense and more common and often needs to be carefully minimized in social interactions.
The model is made up of Status, Certainty, Autonomy, Relatedness and Fairness. These five domains have been shown in many studies to activate the same reward circuitry that physical rewards activate, like money, and the
same threat circuitry that physical threats, like pain, activate.
Understanding that these five domains are primary needs helps individuals and leaders better navigate the social world in the workplace.

Take the SCARF Assessment from NeuroLeadership Institute

Understanding the five domains

The SCARF model involves five domains of human social experience:
Status, Certainty, Autonomy,
Relatedness and Fairness.
 Status is about relative importance to others.
 Certainty concerns being able to predict the future.
 Autonomy provides a sense of control over events.
 Relatedness is a sense of safety with others – of friend rather than foe.
 Fairness is a perception of fair exchanges between people.

These five domains activate either the ‘primary reward’ or ‘primary threat’ circuitry (and associated networks) of the brain. For example, a perceived threat to one’s status activates similar brain networks to a threat to one’s life.
In the same way, a perceived increase in fairness activates the same reward circuitry as receiving a monetary reward.
The model enables people to more easily remember, recognize, and potentially modify the core social domains that drive human behavior.

You can take your own free assessment here.

What Does a CEPA do?

What does a CEPA do?

A Certified Exit Planning Advisor can help an owner….
 Understand the value of their business, both tangible and intangible
 Determine how ready and attractive their company is currently
 Identify the owner’s three gaps (value, wealth, profit)
 Identify the Range of Value of an owner’s company. What is it worth today and what is it potentially worth
 Understand their exit options and how they apply to their company and exit goals
 Better understand their personal vision and personal financial needs
 Align their business, personal and financial goals
 Create, deliver and maintain 90-day action plans helping an owner de-risk their business and grow value
 Bring the advisory team together, and the owner’s internal team together, to work towards common goals and better collaborate

CEPA’s very often work in groups and may be an Accountant, Attorney, Advisor, or other SME (Subject Matter Expert). 

The Core CEPA team is built around a Family Advisor, Wealth Advisor, and Value advisor. 

Then next most critical members is a great CFO or Accountant and a Business Attorney, and then a Commercial Banker. 

Eventually, you may need a Mergers & Acquisitions Advisor, a Private Equity Group, an ESOP Advisor, or a Facilitator, Negotiator, or Counselor.

The important thing is that the team is built especially for the current needs of you, your business, and your family.

Basic Human Resources

The 4 Most Basic Financial Planning Elements/ Personal Human Resources

There is an old saying
“Show me your calendar and your checkbook, and I will tell you what is most important in your life.”
Yes, it is wise to be careful where you spend your time and money; but remember, your energy and mind are limited resources too. If your mind fills up with anxiety or distractions, it is hard to be effective in the world.

Financial planning and life planning, as complicated as they can be, ultimately come down to basic human resources. Using these 4 elements the best way you can, with the cards you are dealt. Often we trade time & energy for money, or trade money for a piece of someone’s mind.

It is important to recognize all the resources. Often people find themselves in traps like being very “thrifty”, but not valuing their time enough. E.g. doing something themselves, that would have really been more economical to have someone else do.

Examples of trade-offs from managing personal resources.

  • When we are young we trade most of our time, mind space, and energy for money.
  • When we are in college we spend time and money to develop our mind.
  • When we have small children, we are almost always low on mind space and energy; so we may spend money to have more things done for us.
  • As we grow in our field of work, our mind can bring us more money than our time.
  • As we first retire we have lots of time. If we are lucky, there is a window where we have our health, energy, and money to make the most of that time.
  • When we are very old we may trade all of our money for a little more time.

Leading Labor Economist Professor Ed Lazear on COVID-19 Recovery

Renowned labor economist Prof. Edward P. Lazear, teaches at Stanford University’s Graduate School of Business. He is also an independent director on the boards of Dimensional’s US Mutual funds. Here, he discusses what policymakers are monitoring with COVID-19, how monetary authorities are responding, and what the global recovery may look like.

  • Could be back to normal in 6 quarters?
  • This is a supply-based recession, not a monetary business cycle demand-based recession- pent up demand.
  • Capital infrastructure is still there for workers to start back up.
  • It is actually liquidity for business survivability and viability, not a activity stimulus.
  • Most people want to get back to work and feeling productive.

Strong Opinions weakly held

on Strong Opinions, weakly held

“We are trying to prove ourselves wrong as quickly as possible, because only in that way can we find progress!” Richard Feynman

Having strong opinions only has real value if we are able to evolve those opinions. Being willing and open to dis-confirming our own theory makes our theory stronger. It is not about the pride of “being right”, it is about being willing to be less wrong. Many complex adaptive systems; human herd behavior, the various financial markets, city states, governments, industries, ecosystems, social networks… all effect your financial plans. There is simply no way to get everything 100% right. That is why financial plans, like flight plans, require a lot of small changes and course corrections over time. Real financial planning is not a 3 in plan setting on a dusty shelf, it a continual process of learning and refinement. The client-advisor partnership is about getting “less wrong over time” and making wise decisions, with really informed best guesses. It’s about probability and gaining a new perspective; not predicting the future with false precision and foolish certainty. 

Paul Samuelson was an influential economist, the first American to win the Nobel Memorial Prize in Economic Sciences. 
Many of his peers complained that the opinions he expressed tended to change. Once, during an interview, he was accused of being wishy-washy and was pointed to an AP wire “Author Should Make Up His Mind.”  His response was perfect “… When the Facts Change, I Change My Mind. What Do You Do?” 

I really like Paul Saffo’s words below. Like the Kaizen iterative improvement process, the best changes come in little steps. This is a brilliant way to become wiser, overcome your biases, and become a little less wrong every day.

“The point of forecasting is not to attempt illusory certainty, but to identify the full range of possible outcomes. Try as one might, when one looks into the future, there is no such thing as “complete” information, much less a “complete” forecast. As a consequence, I have found that the fastest way to an effective forecast is often through a sequence of lousy forecasts. Instead of withholding judgment until an exhaustive search for data is complete, I will force myself to make a tentative forecast based on the information available, and then systematically tear it apart, using the insights gained to guide my search for further indicators and information. Iterate the process a few times, and it is surprising how quickly one can get to a useful forecast.

Since the mid-1980s, my mantra for this process is “strong opinions, weakly held.” Allow your intuition to guide you to a conclusion, no matter how imperfect — this is the “strong opinion” part. Then –and this is the “weakly held” part– prove yourself wrong. Engage in creative doubt. Look for information that doesn’t fit, or indicators that pointing in an entirely different direction. Eventually your intuition will kick in and a new hypothesis will emerge out of the rubble, ready to be ruthlessly torn apart once again. You will be surprised by how quickly the sequence of faulty forecasts will deliver you to a useful result.

This process is equally useful for evaluating an already-final forecast in the face of new information. It sensitizes one to the weak signals of changes coming over the horizon and keeps the hapless forecaster from becoming so attached to their model that reality intrudes too late to make a difference.

More generally, “strong opinions weakly held” is often a useful default perspective to adopt in the face of any issue fraught with high levels of uncertainty, whether one is venturing a forecast or not. Try it at a cocktail party the next time a controversial topic comes up; it is an elegant way to discover new insights — and duck that tedious bore who loudly knows nothing but won’t change their mind!”

“One of the biggest problems with the world is that fools are always so sure and certain about everything and intelligent people are so full of doubts and uncertainties.” Richard Feynman

The power of believing that you can improve. Carol Dweck

The power of believing that you can improve by Carol Dweck.
Carol Dweck researches “growth mindset” — the idea that we can grow our brain’s capacity to learn and to solve problems. In this talk, she describes two ways to think about a problem that’s slightly too hard for you to solve. Are you not smart enough to solve it … or have you just not solved it yet? A great introduction to this influential field.

The power of believing that you can improve | Carol Dweck

Dan Sullivan & Strategic Coach

Dan Sullivan is founder and president of The Strategic Coach Inc. A visionary, an innovator, and a gifted conceptual thinker, Dan has over 40 years’ experience as a highly regarded speaker, consultant, strategic planner, and coach to entrepreneurial individuals and groups.

There is a lot of good ideas at:


Here are two of my favorite concepts.