Entrepreneur’s Wealth Digest
Exit planning presents a unique challenge for entrepreneurs who have one or more partners. We each have unique needs for cashflow, capital and the role we want after the business sells. The goal of successful exit planning is to ensure that every partner is clear about their needs, able to present and discuss that with their partners and is able to have their needs accounted for in the sale process.
For a very high level example, let us say you and three other partners have built a business worth $50 million. You personally feel like the valuation for your company is at a high point and think about being able to take on a fresh challenge with more capital available to you than when you started this company.
The problem is that each of you has a different vision about what you want to do after the business is sold. One partner wants to retire and focus on family and giving back, another wants to start a new business and another wants to become a real estate investor. You are not totally sure about what the future holds, but you are leaning towards taking some time off and traveling before starting your next venture.
With each partner having different ideas about what they want to do after the sale, it can be difficult to arrive at an exit that feels right for everyone. Add to that the issues of the exact timing to sell, who the ideal buyer is and what the deal size and structure should look like, and there are lots of opportunities for conflict among the partners.
Valuations, priorities and timelines are areas where we typically see the most disagreement between partners:
So how do you get ahead of these disagreements and get all the partners on the same page? Here are three strategies to start with:
Business exits for multi-partner businesses introduce some additional complexity, but with open and honest communication between the partners and the right deal team in place, you can get to an outcome that is meaningful for everyone.
If you have a question or simply want to talk through your financial planning, we are here to help.
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DISCLOSURE: Jarrod Musick is an officer of Destiny Capital and Entrepreneur Aligned, a DBA of Destiny Capital. This article is for informational purposes only and should not be relied upon as a basis for your investment, business, or personal financial decisions. We recommend consulting with your wealth advisor, CPA/tax advisor and/or attorney, as applicable to your situation, prior to implementing any new tax, legal, or investment strategy.
Jarrod was born into financial planning and solving financial problems. With his financial advisor father Steve telling stories about finance around the dinner table from an early age, the idea that everyone has a different financial situation was always there. After an early professional career spent in nonprofit and government, Jarrod came back to his roots helping people plan and invest in 2011. Since then, he has worked with individual clients, led internal teams and ultimately became partner and the CEO of Destiny Capital in 2017. With a passion for helping entrepreneurs change the world, Jarrod ultimately oversaw the creation of Entrepreneur Aligned in 2020. With both Destiny Capital and Entrepreneur Aligned, Jarrod leads teams that help people live lives of abundance where money is simply a tool to let everyone be a positive force for the world around them. When he isn’t working with the talented teams for EA and DC you can find him chasing his twins, wiley trout or a podium spot at an OCR race.