The Overview of this episode last update: January 2007 | go to homepage

What is your exit strategy? Steve Watkins, Chairman of Entrex, discusses our eighth option with the CEO Club (Boston) -- sell your stock into the private equity capital markets. Your business valuation is a key and your intangibles may be the biggest part of it! Throughout our work cycle, we compete with big business (over 5000 employees) and mid-sized companies (over 500 employees) for respect, for capital, for customers.... virtually for everthing. Most of us do OK competing with the bigger ones in our industries or we don't survive. But when it comes to the exit strategy and succession planning, we fall on our face. Over 70% of us will. This episode is to help each other maximize the value of our businesses. There is only a limited amount of capital out there and historically big business gets between 80-to-90% of it. They have history, but we offer diversification and tax advantages. The Worst. Nobody wants to see you liquidate (or have others do it because you died on us). Yet, liquidation is rampant. That's getting pennies on our dollars. Tangible assets get sold (fire sales) and the intangibles are lost forever. Liquidation is the worst kind of liquidity. We can understand our equity and liquidity options -- it's just like doing a will -- and get more out of our life's work. The Typical: Most of us will sell our business through merger or acquisition. But, if we get much over two-to-three times sales or six times earnings, we all think we've done very well. Yet, when big business sells, they usually begin at six times earnings. Then we see 40 times and even 300 times earnings (Google) on the open markets. Why should we be satisfied with so much less? The Optimal: Most of us don't think about our stock certificates... if these could be sold to anyone. And, in fact, as long as we have that attitude, it's self-fulfillling. Once we do our first business valuation and study key ratios, we begin to position our thinking to make decisions about people, products, and processes that'll help us focus on creating a transferrable asset. We want every business, including the 17 million sole proprietors, to grow their business in a way that the knowledge base and the intangible assets can be transferred. There is an entire episode for most of the people you meet in this one. more about equity capital... Understanding wealth and capital formation KEY IDEAS: Succession Planning The Introduction in the studio I. Close the Doors (1) II. Give It Away (2) III. Sell It: (3, 4, 5) Sell To Someone Close To You (3) Sell To Someone Like You (4) Sell To The Highest Bidder (5) IV. Sell Over Time: (6, 7, 8) To Your Employees (6) Through An IPO or DPO (7) To Private Equity Investors (8) Eight Possible Options Go further by going to their episode: # Owner Guide More Video 1. Joseph Johnson Yes Only here 1. Ray DiSanto Yes Only here 2. Ebby Halliday Yes Yes 3. Matt/Russ Seeley Yes Only here 4. Jim Schell Yes Yes 4. Peter Schenck Yes Yes 4. Lorraine Miller Yes Yes 5. Tracy Myers Yes Yes 5. Bob Orenstein Yes Yes 5. Larry Starks Yes Yes 6. Ray Smilor Yes Yes 6. Freddie Thode Yes Yes 6. Rick Valencia Yes Yes 6. Ned Lester Yes Yes 7. David Porter Yes Yes 8. Steve Watkins Yes Only here Go Further By category » Stories about family business » People who sold / people who bought » About ESOPs » Selling to private companies » Selling to public companies » Doing a SCOR » Private placements Get some help » Change television stations! » Know your Securities Commissioner » Get to Know the SEC » We'll try to set an example

The Small Business Index of Learning Companies
Click here to be listed and linked from within this site.