In each process of Exit Planning that I advise as CEPA –Certified Exit Planning Advisor-, before talking about valuations, the Wheel of Value or projects to increase value, there is a question that orders everything that comes after. What do you want your company for? What are your personal goals? Are your goals aligned with the company’s goals?
These are simple questions, but many owners avoid them. The company is there, it works, it invoices, it employs 80 people, it pays the bills, it is what one does every day. What do I want it for? The answer seems obvious. But when you dig a little, other themes appear, the most varied.
I have seen, after many years of working with owners, that the responses they generate can be grouped into five fairly clear categories. Each one has a different internal logic and demands different decisions in the preparation process.
Type 1. The company as self-work. There are owners who have their company, in fact, as a way of having control over their own employment. They like what they do, they like not having a boss, they like the rhythm. The company serves them for that. They don’t want to make it bigger than it is or turn it into something that overwhelms them. That answer is legitimate and, in addition, it organizes many decisions: how much to delegate, how much to invest in growth, how much to formalize. For this profile, the immediate priority is more to ensure that the owner is well and that the business is sustainable at its scale than to prepare a sale. However, if it may be necessary to prepare a transition, at some point even if it is for biological reasons, it will happen. A valid response is that the current owner does not want to deal with the issue (personally I do not recommend or agree with it, but I respect it), but at least it is an express decision.
Type 2. The company as a property vehicle. Other owners have the company as their main way to build wealth. What matters to them is maximizing the value of the asset, diversifying that wealth into other instruments at the right time, and eventually coming out with a well-made operation. For this profile, everything that increases value will have a lot of meaning: professionalization, client diversification, formalization, systems. And everything that does not increase value leaves, because it distracts resources.
Type 3. The company as a project of significance. There are owners who want to build something that will outlive them. A brand, an institution, a legacy. In this case, the health of the organization in 20 years matters more than next year’s result. Professionalization, succession and corporate governance cease to be administrative hassles and become part of the heart of the work. Decisions that are sometimes difficult in the short term are more easily accepted, because they build what is to come.
Type 4. The company as a community commitment. Some owners are the main employer in a small city, supporting several families in the area or providing an important service in a region. For them, selling cargo has consequences that exceed the personal. That responsibility changes the logic of the transition. Variables appear that do not matter in other profiles: who you would sell with, what the buyer does with the equipment, what happens to the community if the company changes hands. Each decision falls under the umbrella of a broader legacy.
Type 5. The owner who no longer knows what he wants the company for. At some point the answer was clear and today it is diluted. Before we were passionate about it, today not anymore. They are cycles of life and “humans pass these things on to us.” Suddenly, they keep it out of inertia, because they do not dare to ask the question or because they have not yet found the next project or how to move forward with what they are passionate about and they may feel “trapped.” In that case, talking about the company’s value range is important but it is not the most important thing. What is urgent is the personal conversation: what is happening to us, how we are feeling, it can even have consequences on our health, then “how we turn the page” becomes the most important issue. Then: what happens when we leave, what project gives us meaning in the next stage of our lives and at the same time, this often serves as a driver to move forward and renew states of mind.
There is still one layer that should be kept in mind. Business owners, like all people, change. The answer that worked at age 40 may not work at age 60. What was passion turns into fatigue. What was ambition becomes a desire for another life. What was a single project is accompanied by other parallel projects. This evolution is normal.
The problem is not realizing it and not knowing how to solve it, it is not easy. Continuing to manage with the old answer, in a new stage, is usually one of the silent causes of entrepreneur exhaustion.
My recommendation, after a lot of work with the owners, is to listen to each other and understand each other and then we can resolve with relative simplicity what our “north” should be. Return to this question from time to time, identify which type you respond to today, and review whether the company is organized and aligned. A company designed as self-employment and an owner who is actually looking for wealth are going to clash. One that is designed for transcendence and a tired owner is going to suffer. The coherence between the type of response and the type of company is what sustains a process of Exit Planning and transition in that it is serious and deep.
Next comes the value range, the value wheel, improvement projects, transition planning. But all of this, without the correct answer to the first question, is built on sand, foundations that will not hold….
*Consultant specialized in Exit Planning and increasing the value of companies. Author of “The Reinvention of the Owner.”
by Gustavo Schutt
