How to Plan for a Business Exit

Despite the economic upheaval brought on by market volatility, M&A activity in many industries remains robust. However, business owners and senior executives now face the challenge of managing the intricacies of a sale while navigating uneven waters.

Thankfully, there are tried-and-true practices that can serve business owners and C-suite executives well in this current environment.

I recently moderated a business owner roundtable hosted by the Exit Planning Institute’s (EPI) Rocky Mountain chapter to explore those practices and how businesses can be successful in structuring an exit. Joining me were Cortney Brand, LRE Water President and CEO; John McCarvel, PopSockets President; and John Post, Alert Logic Chief Financial Officer.

Thanks to Cresset’s own Gus Spaulding, President of the EPI Rocky Mountain chapter, for organizing this event. The following are four highlights of our conversation:

1. Seek out honesty over flattery

As good as it may feel, all of the panelists agreed that it is best to avoid working with an investment bank that tells you what it thinks you want to hear. When you’re promised the moon, things rarely end well. John Post recalled his experience working with an investment bank that did just that and painted an overly rosy picture. The outcome? The deal they were structuring fell through. The next investment bank his firm worked with was much more straightforward, pointing out the good and the bad, and clearly laid out what his team needed to work on. That approach resulted in a successful sale.

“That honesty really helped focus our story and target the right set of buyers,” John said. “Make sure you are not buying too much into your own hype. Realism is very important.”

He added that in the end, his company didn’t go with the highest bidder, but rather the one that was the best cultural fit and most likely to follow through on the transaction.

2. Always be thinking about what’s next

Regardless of whether a business is seeking to attract a buyer now or in the long term, John McCarvel stressed the importance of diversification in both products and services offered, as well as markets served. He gave the example of his time with Crocs, and how the management team committed itself to becoming “an iconic brand, not just an iconic product.” That meant pivoting from the one signature product to multiple offerings, and expanding to international markets as well. John has applied that philosophy to his current role with PopSockets, which is now in more than 100,000 stores in the United States alone.

3. Keep your eye on the ball

There’s no doubt about it. Planning for a business exit can become all consuming. Don’t let it. As John McCarvel stated, “Don’t underestimate the amount of work you are going to undertake throughout the process. Have a very focused approach. Sit down as a leadership team and allocate time and priorities.” In other words, don’t let your business suffer as you plan for an exit.

4. Make sure your team is on board

Nothing can throw a wrench into the sale of a business like losing critical employees late in the game. After all, a prospective acquirer is buying the brain trust of your team as much as any physical asset. All of the panelists agreed that it is essential to bring key employees into the conversation as early as possible and make it known they will be in as good of a position, if not better, going forward. Also, make sure NDA agreements are in place for essential staff well in advance of a sale. You not only want your top talent to remain with the organization up to and through the sale, you want them to be excited about what’s to come.

Schedule a call to learn how Cresset works with CEO Founders and Entrepreneurs to plan for business transitions.

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About Cresset

Cresset is an independent, award-winning multi-family office and private investment firm with more than $45 billion in assets under management (as of 04/01/2024). Cresset serves the unique needs of entrepreneurs, CEO founders, wealth creators, executives, and partners, as well as high-net-worth and multi-generational families. Our goal is to deliver a new paradigm for wealth management, giving you time to pursue what matters to you most.

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