Do you have an exit strategy? Do you know how to sell your business successfully?
It’s important that you prepare an exit plan for yourself, your business, and your future.
Chris Vanderzyden is an author, speaker, and leading educator on exit planning and mergers and acquisitions. She is a founding partner of Legacy Partners, LLP, an exit planning and M&A advisory firm dedicated to creating and executing exit strategies for privately held mergers and acquisitions. She is also an expert contributor for media outlets, a guest lecturer for Harvard University’s Entrepreneurship and Innovation class, and the bestselling author of 7 Steps to Entrepreneurial Victory. She has recently released her newest book, Master Your Exit Plan: Sell Your Business, Preserve Your Legacy.
In this episode, Chris tells us the importance of having an exit plan in place for now or the future and what the risks are of not being prepared for it.
What you will learn from this episode:
Discover the importance of planning an exit strategy for your business and financial future
Learn what are the six exit strategies you can choose from and how to apply them in your business
Find out what are the risks of not being prepared with an exit plan
“In order to decide what exit strategy is right for you, you have to understand all of the things that are important to you.”
– Chris Vanderzyden
Valuable Free Resource:
How to exit your business without the stress and without sacrificing your future financial freedom: Legacypartnersllp.com
01:38 – Where it all started: Chris shares how she got interested in exit planning and how it all started
02:42 – Chris talks about what exactly is a master exit plan
03:38 – What are the risks of not having an exit plan for your business
05:02 – Chris shares what are the six exit strategies and how can you decide which one is for you
09:29 – Selling a Business Isn’t Like Real Estate: What are the seven steps into selling a business
11:46 – Chris shares what are the services they offer in the Legacy Partners LLP
“Without having all of those parts of themselves aligned, the chances of not being successful exiting their business are pretty sky high. So, it requires a comprehensive view of the business owner in order to do it successfully.” -Chris Vanderzyden
“You have to have a comprehensive financial plan done in which you are projecting, “After I exit my business, this is what I want my life to look like. And this is what the financial responsibility will be with that. And so, if I sell my business, will I be able to fulfill those business personal, and financial goals?” -Chris Vanderzyden
“We looked at a couple of different exit options, and then came up with the right one that would have fulfilled their goals, both financially and with the business and personal.” -Chris Vanderzyden
“One buyer is no buyer.” -Chris Vanderzyden
“The purpose is to engage with multiple buyers because that’s the way you’re going to fulfill your goals to a higher level.” -Chris Vanderzyden
“It’s a little more intense than selling a business, but it’s well worth doing it correctly.” -Chris Vanderzyden
“It’s very important to recognize that you do need somebody that is going to be on your side of the fence. There’s nothing worse for a business owner, “Do they have a transaction, they wander off?” -Chris Vanderzyden
“When deciding how you want to exit that business, you also have to understand the value of the company. Integrate that value into your personal financial plan.” -Chris Vanderzyden
Ways to Connect with Chris Vanderzyden:
Ways to Connect with Sarah E. Brown:
To speak with her: bookachatwithsarahebrown.com
Full Episode Transcript:
Chris Vanderzyden 0:00
And it’s very important to recognize that you do need somebody that is going to be on your side of the fence.
Sarah E. Brown 0:14
Hello, everyone. Welcome to The KTS Success Factor Podcast for Women, where we talk about challenges senior female leaders face in being happy and successful at work. I’m your host, Dr. Sarah E. Brown.
Sarah E. Brown 0:33
My guest today is Chris Vanderzyden. She is an author, speaker, and leading educator on exit planning, and mergers and acquisitions. She is a founding partner of Legacy Partners, LLP, a mergers and acquisition advisory firm dedicated to serving privately held middle market business owners to create and execute successful exit strategies, resulting in the harvesting and preservation of wealth. She’s the author of the best-selling book, 7 Steps to Entrepreneurial Victory. And her latest book, which we’re going to talk about today, Master Your Exit Plan: Sell Your Business, Preserve Your Legacy. Chris, welcome!
Chris Vanderzyden 1:26
Thank you, Sarah. Thanks for having me.
Sarah E. Brown 1:28
So, I have to ask, this is a very interesting niche. How did you get interested in exit planning?
Chris Vanderzyden 1:38
Well, I am truly a serial entrepreneur and Legacy Partners is actually the third business I built ground up. And I’ve actually sold two of my previous businesses. And the first business that I sold, was in my early 30s, and I was a CPA. I had a really heavy finance background coming from PricewaterhouseCoopers. And we sold the company. We made every mistake in the book. And so that was my intro into mergers and acquisitions and finding out what is the correct process to go through so that you’re not taking advantage of by the buyers that are out there. So that’s kind of how I got in the field, and now it’s been decades later. And I’ve been helping privately held business owners grow and exit their businesses and now it’s really an important topic because just by demographics alone, all the baby boomers are getting ready to retire, and often that will mean an exit from a business.
Sarah E. Brown 2:31
Mm-hmm. So, you talk about the importance of thinking and planning ahead of time, and you call this an exit plan, but what exactly is a master exit plan?
Chris Vanderzyden 2:42
Yeah, you know, there are a lot of people out there who talk about exit planning. And what we do here at Legacy Partners, we create master exit plans because we look at the business owner in a very comprehensive fashion. Most people who say that they’re exit planners are really focused on the transaction. And oftentimes they are mergers and acquisition people or investment bankers, and they’re focused on just the transaction. But there’s so much more to an entrepreneur. And so, what we do is we create a master exit plan that addresses the business owner’s business, personal and financial goals. Because without having all of those parts of themselves aligned, the chances of not being successful in exiting their business are pretty sky high. So, it requires a comprehensive view of the business owner in order to do it successfully.
Sarah E. Brown 3:35
What exactly are the risks associated with not creating one?
Chris Vanderzyden 3:38
Oh, dear, you know, the biggest risk that we see now is that a business owner does not plan for their exit. And then they’re confronted with either typically one or two things. One is they’re approached by a buyer directly, and they engage with that buyer, and they’re not able to sell their business. Something comes up and they’re not able to sell the business or they’re not even able to attract a buyer because they’ve not planned on an exit, and they’ve not positioned the company correctly. The second big thing is that the business owner has a health crisis. And they’re not able to run the business. And there’s some significant risk in that. I mean, you could spend years or decades working on a business, and then if you have something like that happen, and your business shuts down, everything you’ve worked for in creating that asset gets wiped out. So, there are significant risks to not planning. And there are also other risks. You know, not being able to sell the company or going through a transaction and not strategizing for tax mitigation purposes, not having proper estate planning performed. So, there are a lot of various things, but mostly it’s the concern of not being able to exit successfully and get a return on investment.
Sarah E. Brown 4:49
Hmm. So, I’ve read your book, Master Your Exit Plan, and in it, you outlined six exit strategies. So, tell our listeners what they are and how they go about deciding which is best for them.
Chris Vanderzyden 5:02
Yeah, I mean, the six most primary exit strategies that we talked about are, you know, sometimes there’ll be family members, or maybe it’s a family succession. Of course, taking a business public is a big sexy exit, but you know, very difficult to do. You have to have quite a gross trajectory that you can prove to be able to go public, so that’s not very common. An employee stock ownership plan used to be used much more in previous years. Not so much anymore, but it’s a valid exit strategy. Typically, a bigger company will do that, 300 plus employees, so an ESOP management buyout. And then, of course, there’s closing. You close the door on the business. That’s an easy, quick way to exit the business and verifiable. And then the most common is to do a sale to either a financial or a strategic buyer. That’s most common, and that’s the most sought after because that’s typically where you get the highest return on investment for an entrepreneur. And then I’ll say a subset of the sale to a third party is you could do what’s called a “recapitalization” in which you sell part of your business, and retain an equity position. There’s a variety of different ways to exit that way, but very popular. We’re involved in a lot of those types of transactions today.
Hi, this is Sarah Brown again, the host of the KTS Success Factor Podcast for Women. I hope you are enjoying this episode and gaining some tips and inspiration on how you can be happier, more successful, and experience less stress at work.
If you would like to learn more about how you can empower the women in your organization to do the same, simply click on the show notes, to see how you can connect with me.
As an added bonus for my podcast guest, you will see how you can book 30 minutes with me to explore how you can implement a scalable self-coaching program for the women in your organization. Simply visit bookachatwithsarahebrown.com.
Now back to this informative episode.
Sarah E. Brown 7:22
Well, I don’t want you to recap the whole book, but just give us a high level, how do you go about deciding which one is the best for you?
Chris Vanderzyden 7:31
That’s where having a master exit plan comes into play. Because in order to decide what exit strategy is right for you, you have to understand all of the things that are important to you. When deciding how you want to exit that business, you also have to understand the value of the company. Integrate that value into your personal financial plan. And you have to have a comprehensive financial plan done in which you are projecting, “After I exit my business, this is what I want my life to look like. And this is what the financial responsibility will be with that. And so, if I sell my business, will I be able to fulfill those business, personal, and financial goals?” So, in order to determine which one is right, you really have to do extensive planning, we’ve worked with many clients who thought they were going to do a family succession. As we get into this process, we value the company. And then of course, when you do a family succession, typically there’s a family discount, right? So, you’re going to sell it for less than you could get on the open market. So, therefore, we found out that the money that they would get from selling it to a family member was not going to be enough to support their future financial goals. So, we ended up doing the recapitalization, and I spoke up. We sold the business to a financial buyer. The business owner bought back an equity interest at close, and then ended up giving that interest to the family member that was involved in the business. So, in that situation, we looked at a couple of different exit options, and then came up with the right one that would have fulfilled their goals, both financially and with the business and personal.
Sarah E. Brown 9:04
Hmm, that’s a great example, so thank you for sharing that. So, this book is very accessible. It’s very easy to understand. And regardless of where you are in thinking about the process, the information that you need is here. And one of the things that you outline here is the seven steps to selling a business. Do you want to recap them for our listeners here?
Chris Vanderzyden 9:29
Oh, yeah, I mean, everybody tends to believe that selling a business is probably going to be just like selling a home. Right? But, you know, that’s not quite true. We have a very different process for M&A. And, of course, it begins with understanding the value of the company and then preparing the documentation, once I’ve identified their pool of buyers. And so, step one, I would say, is to prepare the documentation. And then the purpose of the documentation, which is much more than your tax returns and financial statements, once you’ve prepared that documentation, the purpose of it is to send it out to a pool of buyers. So, the whole purpose of doing it correctly is to engage with multiple buyers because if your listeners remember anything from this, this podcast, I would want them to remember one buyer is no buyer. The purpose is to engage with multiple buyers because that’s the way you’re going to fulfill your goals to a higher level. So, the second step is to engage in the auction process with multiple buyers. Then there’s a step in which you’ll have management meetings. So, you’ll meet the buyer, and the buyer will meet you. It’s kind of like a first date. You want each other to like each other but you want to be truthful and want to see if it’s a good fit and if we can knit the buyer and seller together for future success. And then in the fourth step, you have a call of offers that come in in a form of a letter of intent. The offers are negotiated. Once you have picked your buyer, you sign the letter of intent that basically says to the buyer, “I am focused on you. You will be my buyer for all intensive purposes now, nonbinding. You are committing to going into due diligence”, which is the sixth step. And then the final step is closing. And that’s the final negotiation of the definitive purchase agreement. And also, part of that is the warranties reps and indemnifications, which your attorney will help you with. So that’s the seven steps. So, it’s a little more intense than selling a business, but it’s well worth doing it correctly.
Sarah E. Brown 11:24
A lot more than selling a home, but I get a real estate agent to sell my home. And I would guess that when I’m ready to sell this business, I would probably engage with someone like you to help me with that as well. So, tell us a little bit about the services that Legacy Partners LLP provides to women who might be interested in selling their business.
Chris Vanderzyden 11:46
Well, what we do is we create, as we’ve been saying, a comprehensive master exit plan so that the business owner understands the value of the company, and the steps that they can engage in in order to improve the value or get the business positioned to attract buyers, integrates the financial plan, and we look at the estate plan and talk to them about the post ownership options. So, you want to create a master exit plan, that’s the first step, and that’s primarily what we do. Now, we do have M&A advisory services, which means that we advise the client through the process as an independent advisor. So sometimes we’ll have clients who will work with another investment bank. We always vet the right provider that we think will serve our clients the best. And then we advise them through that process. So, they have somebody who is only looking at their best interests. And it’s very important to recognize that you do need somebody that is going to be on your side of the fence. There’s nothing worse for a business owner, do they have a transaction, they wander off? Was my representative, really- were they on my side? Or were they on the buyer’s side? That’s not a good feeling. So, we do the master exit plan first and then we will work with them to go through the M&A side and advise them as they wish.
Sarah E. Brown 13:06
Got it. And so where would they find you?
Chris Vanderzyden 13:09
We are at Legacy Partners LLP, that’s two L’s and one P on that, just to confuse you, Sarah. Sorry. So Legacypartnersllp.com. And again, of course, my name is Chris Vanderzyden, and I’m fairly Google-able and on LinkedIn.
Sarah E. Brown 13:24
Terrific! So, Chris, thank you so much for being with us today.
Chris Vanderzyden 13:29
I appreciate you having me, Sarah, and spreading the good word and helping all those entrepreneurs out there.
Sarah E. Brown 13:34
Thanks for listening to The KTS Success Factor Podcasts for Women. If you like what you’re hearing, please go to iTunes to subscribe, rate us, and leave a review. And if you would like more information on how we can help women in your organization to thrive, then go to www.sarahebrown.com. You can sign up for our newsletter, read show notes and learn more about our podcast guests, read my blog, browse through the books or contact us for a chat. Goodbye for now.