Step 8 The Employer On Starting, Running and Growing a Business. This page is for all of the Small Business School visitors

Step 8: Exit at the Top

last update: January 2007

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Paths Within Step 8

1. The Basics: Business Model and Life Model

Maximize your business valuation.

You are coming full circle but you are up much higher on the mountain. You will continue to ask yourself basic questions about who you are and what you want to do and what you can do that continues to give meaning to your life. Every answer contributes to your exit strategy. Those answers will also inform your new "personal business model." At the same time, you'll keep watch over the fundamentals of your business, the product line and its evolution, its leveragability and extensibility.

You have been the "key" person and the transitions through this phase are key for harvesting, becoming liquid, and feeling empowered to do those things that you have always thought you should do but never had the time.

Case Studies:

Understanding Exit Strategies by creating an equity model:

Exiting at the Top: This episode of the show is about exit strategies. We believe the last five examples return to the founder the most dollars for their sweat equity and the intangibles. The first three exit strategies are also just fine. It is all a very personal decision.

In the last three examples with the episode, each owner/founder created an equity structure so others could participate more readily in the ownership of the business. As the owner/founder becomes more liquid, ownership is passed to the next generation. Hard-earned dollars are taken out of the business without destroying the business.
Bridgecreek: Frank Jao is now dedicating 50% of his time to work with people in his homelands. He has returned to China and Vietnam with the US Department of Commerce to help with a diversity of business development projects.
TiresPlus: Tom Gegax sold his business and now spends time with Depak Chopra and his healing practices. He has written books and he is personally involved with several businesses, especially with the CEO/founder, as their coach.
Ken Duncan puts his work and his life into perspective.
These two who tried to retire, play golf, and check their investments. They didn't sit still too long and started again.

2. Your community: Maximize your business valuation among the people who know you.

This is your business. It has been your life's work; what would you do without it? What would you do with your unscheduled time?

Now when you look into the mirror, you can look back to thousands of steps, all part of building your legacy. So, within an ideal world, what is your unfinished business?

Case Studies for Unfinished Business:

No one method is good for every business. There is no easy and right answer. We prioritized the models by the "dollars returned-to-the-founder."

Our first recommendation: : Maximize your business valuation. Just think about it like you would any other business problem:
- Work on it over time. It is far better to do things intentionally than having to make quick decisions where you miss details (especially the value of your intangibles). So, do it over time.
- Minimize your costs of doing that valuation. Talk with your CPA about valuation of your intangbles and try to realistically push them into your assets column.
- Involve your key people. The formal ESOP program requires that everybody within the business be involved. There are many modified employee-stock programs that really begin using the structure of the DPO or a private equity placement.

3. Structuring your day: At this stage in our life there is nothing more important for us to do than to prepare for the next generation to take over. Creating a smooth transition is not a trivial task. To study some of the case studies associated with each model, please go back to Step 7.

Franchise . Several of the businesses that we have studied have grown very large through franchising.
Direct public offering (DPO). Some owners have used private placements and/or the Small Corporate Offering Registration (SCOR) to grow larger than a "small business." These businesses did not do an IPO because they did not want to give up "so much equity for so little," and/or they wanted to maintain control for a little longer.
Private Equity Market. There is an introduction to the basic concepts in the last section of the Exit/Equity episode of the show. , This is not venture or angel capital; these are private placements and somewhat akin to the offering memorandum, except within this structure there is a standardization for valuation and there is a secondary market so your investors can more readily get liquid.

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Get on your path and focus on the next step.

Step 8. Exit at the top	$$$$
Step 7. Sustainability	$$$$
Step 6. Growth	$$$
Step 5. Employer	$$
Four steps to run / grow your business.

Step 4. Sole proprietor	$$$
Step 3. Incubate	$$$
Step 2. Start-up	$$
Step 1. Initial idea	$
Four steps to start / run your business.


	MORE CASE STUDIES (continued)


	Employee-Stock Ownership Programs. Some of our small business owners took the final step -- became liquid -- by selling the business back to the employees. Mergers & Acquisitions (M&A). For most of the business owners we have studied, their last step was to be acquired. They sold their business. A few businesses have grown very large by acquiring others. IPO (Initial Public Offering.) Be very careful here. You're playing with the "big boys" and you will not be a small business for long or you will be out of business. Often IPOs kill the small business spirit; and this money usually will cost you the most to obtain, but you may also be able to obtain more here than from any of the other four options.
	Direct Public Offering (DPO). You can raise money from a private placement with a limited number of qualified investors using an offering memorandum. Or, you can raise money from an unlimited number of unqualified, smaller investors using a Small Corporate Offering Registration. Learn the difference between both documents, an offering memorandum and the SCOR document, and how to decide which one to use. There is only one reason to go public: Raise Capital First, we asume that you have a good track record and a good story. You should have at least one of these other components: 1. Your early investors want to cash out. 2. You want to be more liquid. 3. Other people want a piece of the action. 4. You want to give people a way to buy in. 4. Projecting your new days. You are now implementing the exit strategy that we have encouraged you to define. We sincerely invite you to join us in a special way. As usual, you have many choices as to how you spend your time. But know that you are a valuable resource for this country, as a mentor to small businesses, as a senior advisor within your national trade association, you have earned your "wisdom wings." You can volunteer. You are probably well-aware of the Service Corp of Retired Executives (SCORE). Though it is part of the Small Business Administration (SBA) and often the executives are from larger businesses, it is a good group. There are also independent groups like Jim Schell's OK Groups or Opportunity Knocks. The invaluable service to their communities cannot be exaggerated. We also have a proposal for you. Having come up through all eight steps of the small business mind, we invite you to work with us specifically to implement a Small Business Index of Growing Businesses. This index would be only for good businesses. They would be invited and qualified, and the index would be dynamically based on every closing -- day-end, week-end, month-end, quarterly and annual -- of key financial ratios of each business and this information would be available by industry type for the most dynamic economic research from a sector of the economy that is always under the radar. No particular business' financial data would ever be available for specific analysis. It is a trust muscle that must be exercised. Such an index -- let us dream of the possibilities -- if based on 40,000 of the best small businesses in the USA, would put these businesses in position to get the capital they need to grow. Just in the USA the annual shortfall of dollars for small business owners who apply for SBA-guaranteed loans generally ranges between $50 billion and $70 billion dollars each year. That is just the people who apply. Add in the people who do not apply and the figure could be multipled by some factor of ten. A little common sense tells us that the global shortfall for good businesses is a factor in the hundreds. A key goal of SmallBusinessSchool is to change the dynamics then these facts. If you would like more information about any topic in this section of the web site, please drop me a note, and I will try to respond as quickly as possible. Thanks. - Bruce Camber, founder, SmallBusinessSchool go to the PostScript...

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