THE EXIT PLANNING BLOG
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Exit Planning Lessons from Classic Halloween Characters
by Colleen Kowalski on October 19, 2022
There’s a chill in the air, leaves begin to fall, and pumpkins adorn every doorstep. Behind those front doors are households gathering on the couch to watch their favorite scary movie. Werewolves and monsters appear on the screen and scare the viewer enough to hide under their blanket.
The scariest part?
The characters in these Halloween movies remind you of your business exit strategy.
Frankenstein – A Little Bit of Everything
The 1818 classic novel written by Mary Shelley, Frankenstein: or, The Modern Prometheus, shares the story of Victor Frankenstein and his science experiment gone wrong. By combining assorted materials he thought he would be able to create life. However, he was sadly mistaken. Without a deep understanding of what he was doing, he created a monster who was incapable of meeting his goals and his plans.
Think of your business exit strategy. Are you combining bits and pieces of other owners’ strategies because you have seen it work for them? You think, “surely it must also work for me.” However, baselessly combining components of other exit plans will not result in a successful strategy for your specific business. According to our most recent State of Owner Readiness research, nearly 80% of owners have no formal value enhancement strategy and 35% have no understanding of their business value. Without a detailed, written, and holistic exit plan, you are likely to miss out on value growth opportunities during your exit.
Your business is worth 70-80% of your total net worth, it deserves more than a pieced-together exit strategy. Learn more about the Value Acceleration Methodology and how to effectively plan for your exit here.
Bride of Frankenstein – Working with Family
In the 1935 Frankenstein film sequel, The Bride of Frankenstein, the scientists once again learn what happens when they decide they know what is best and take creation into their own hands. Dr. Frankenstein teams up with Dr. Pretorius to create a bride for Frankenstein’s monster. Frankenstein’s monster spends the majority of the film on a rampage and once presented with his newly created bride, the audience hopes for a painless resolution to the film. Alas, the new creation rejects Frankenstein’s monster. He then destroys the building where he, Dr. Pretorius, and his new “bride” reside.
Think of yourself as Dr. Frankenstein and your business as your monster. Your business is not performing how you had hoped and you are looking for ways to improve and mitigate risky operations. You decide that bringing in a family member to the business is the best way to do this. However, this family member has no idea how the business operates. They do not get along with key members of your team, and they have zero interest in getting involved in the business. What you thought would make your business better, has in fact led to its destruction.
Studies show that only 40% of family-owned businesses last until the second generation, and an even fewer 13% will make it to the third generation. If your business exit strategy in a family business is to simply give it to the next generation or another family member, you will not have the exit you hoped for, or even worse, your business could suffer a devastating downturn.
Werewolves – All is Not What it Seems
Werewolves date back to the earliest known Western prose, The Epic of Gilgamesh, and Greek Mythology. While there are many tales of shapeshifters, turning people into wolves, and the general chaos that ensues when a human being becomes a wild wolf, the general premise remains the same. A mythical force turns a regular person into a wolf, whether for the duration of the full moon, while wearing a wolf pelt, or even applying a magical ointment. This human appears to be in good health and generally “normal”, however, what unsuspecting townsfolk will soon realize, this person is a monster.
Is your business a werewolf? Does it look successful on the surface but lacks value when you take a closer look? Have you tried and failed to sell your business because potential buyers backed out during the due diligence phase?
EPI President, Scott Snider, shares, “I think many business owners in the United States of America would say they have successful companies. These businesses are seemingly attractive, have strong profit and loss statements and balance sheets, happy customers, engaged employees operating in a nice culture, and a great industry reputation. But when the business owners go to sell their company, they cannot or they do so for much less than what they thought it was worth. Why? Because their company, although very attractive, was not ready to be sold. Although successful, their company was not significant.”
Learn how to go from a successful company to a significant one in our whitepaper.
Skeleton – What is Lurking in Your Closet?
With the rising popularity of larger-than-life skeletons as Halloween yard decor in the past few years, skeletons are surely on everyone’s mind this autumn. With the skeletons taking center stage in front yards across the country, what happens to the skeletons in the closet? The phrase “skeletons in the closet” has various origins in history. Some share that it was first used in Gothic novels in the Victorian era. Others highlight the first instance of its usage in an article published in 1816. However, the most intriguing origin story relates to body snatchers hiding literal skeletons in their closets to hide their intentions of educating others on human anatomy. The phrase always portrays the “hider’s” intentions of concealing something embarrassing, frightening, or damaging.
Think of your business. Are there things you wish would stay hidden away that are negatively impacting your company? You may know they are there but are too nervous about eradicating them. But more likely, you are none the wiser of the horrors hiding in your business. Owning a business comes with more than its fair share of risks. To increase value and minimize risks in your business, you should follow the 5 Stages of Value Maturity as detailed in Walking To Destiny. Roughly 70-80% of your net worth is locked in your business. In order to maximize your value, you need to set up a system to determine the value hidden in your business.
Dracula – Draining the Life Out of You
Published in 1897, Bram Stoker’s Dracula has inspired hundreds of novels, films, television shows, and other vampire-related media. Stoker appeared to model his antihero after the 15th-century Romanian prince, Vlad Tepes or “Dracula”, the Transylvanian son of Vlad II Dracul. Although some alternative physical descriptions of vampires have appeared in pop culture since Stoker’s novel, namely the glittering Cullen family of Twilight fame, their general concept has remained unchanged. Vampires drain the blood and the life out of their victims.
Is your business draining the life out of you? Do you spend every waking moment at the office and every sleepless night thinking about your business? While not sustainable for you personally, when your business is entirely owner-dependent, it is likely to crumble as well. In an owner-dependent business, most of the perceived value is tied to the owner, not the business. If you try to sell your business, you will be less likely to receive an offer since you are the most valuable asset in the business. In the unlikely event that your business does sell, it will be for a lower multiple than you would anticipate.
Is your business entirely dependent on you to be successful? See the signs of owner dependence in our infographic.
Exit planning does not have to be scary. With proper planning and strategic thinking, you can avoid these monsters that could otherwise haunt your business.
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