The MHEDA Journal - Second Quarter, 2016 - (Page 54)
What's Your Exit Strategy?
BY MIcHAEL MARKS, INDIAN RIVER cONSULTING GROUP
've worked with dealers and suppliers in this industry
for decades, and conducted multiple studies. The rate of
change has never been greater than it is now. In particular,
we're witnessing an escalating pace of consolidation that
is forcing the hands of many dealers in the industry.
The time to start thinking about your
next steps is not when you receive an
offer to buy your business - whether
from a competitor, a complementary
dealer or an OEM. Instead, go away
with your executive team and play the
"What if?" game now. What if a primary
supplier approaches you with an offer?
What if something unplanned happens
to the owner? What if we lose a key line?
The kiss of death is denial. If you
don't have a plan, you are a target. You
don't have to change anything you're
doing today, but you do have to think
through your alternatives in advance,
and make small steps to prepare yourself so that you're in a strong position
when you need to pull the trigger. In
my MHEDA presentation, "Industry
consolidation and Your Exit Strategy:
Opportunities and Threats," I'll talk
about why it's important to conduct
a Strategic Alternative Analysis for
your business in light of the change
in the industry.
Here are some of the drivers of
change - many of which are driving
consolidation - that you need to consider as you plan your next steps:
The wave of Baby Boomers who
started their businesses 20 or 30 years
ago are looking to retire. Many have not
planned ahead, leaving the business
in disarray or positioned for a quick
sale. Learn from them. Eventually,
you must decide what happens next.
And if something unexpected happens,
don't leave it to a distraught spouse
or children to determine the path of
your company. Your exit strategy can
be determined far ahead of time. You
have multiple options:
Pass the business to your offspring.
There are right ways to do this, but
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sometimes "love" gets in the way of
seeing competence. Don't confuse the
transition of ownership with the transition of management. You may be able
to pass it on to your son or daughter,
but they may be too young or inexperienced to run the company. So instead
you may set up temporary management
in the case of your passing or sudden
change. And set up a board of directors
to manage the transition and serve as
an outside check and balance.
Transition to professional management, but maintain family ownership.
If you've spent a few decades building
the business, but have no one in the
family to pass it to for management,
recruit professional management. And
set up a well-functioning board if you
haven't already. If you die, the outside
directors will know your wishes. The
bottom line: Design your business to
survive beyond the entrepreneur. You
could theoretically keep the business
in the family for generations.
Sell. Selling plays into the more
recent boom we've seen in industrial
markets. If you want to create a liquidity
event, there is and has been an excess
of private capital available to invest. In
addition, strategic buyers - other dealers, OEMs - also continue to spend to
grow market share in a relatively slowgrowth market.
Surfeit of Capital
Looking to Invest
The next two years are going to be a
really good time if somebody wanted
to sell their company, because there's
more available capital to invest than
there are companies to buy. Private
equity firms in particular need to
Table of Contents for the Digital Edition of The MHEDA Journal - Second Quarter, 2016
From the Desk of Liz Richards
Ask Your Board
MHEDA University Calendar
MHEDA Member Profile
Teamwork and Personal Accountability
Exhibitors' Showcase Product Guide and Floor Plan
Six C-Level Cyber Blunders (And Solutions)
What to Look Forward to in 2016
How to Build a sense of Community for Your Business
Women Mean Business
What's Your Exit Strategy?
Creating Great Customer Experiences: Why, How and Why Now?
Turning Near Misses into a Winning Safety Environment
Too Much of a Good Thing
Matuson's Sixteen Workplace Predictions for 2016
Spotlight on Association News
Index of Advertisers by Product Category
The Last Word
The MHEDA Journal - Second Quarter, 2016