Welcome back fellow investopreneurs!

Last week we asked you to ‘identify which exit you currently are mastering’ and the results are in!

• Exit 2: Exiting out of ‘doing the work’ by building a team

• Exit 5: Exiting our of the business

This week, we are curious what are you paying attention to in your business by ‘Measuring What Matters’?

Master 5-Exits of Ownership

Instructions: Work through Steps 1 - 3 by completing this template & then schedule your call to review + collaborate with an advisor.

Step 1: Understanding the 5 Exits

Purpose: This step aims to clearly define the sequential exit stages that a business owner may go through, from the initiation of their business to their final exit, helping them understand where they currently stand and what their next target should be.

1.1 Detailed Description of Each Exit Stage

Master 5 Exits of Ownership

Exit Stage 1: Exit from the Day Job

• Description: This stage involves moving from regular employment to dedicating full time to your entrepreneurial venture.

• Characteristics: Increased autonomy, higher risk, potential income fluctuation.

• Requirements: Sufficient business income to replace salary, clear business plan, risk mitigation strategies in place.

Exit Stage 2: Exit from Doing the Work

• Description: Transition from daily hands-on operations to oversight and strategic planning.

• Characteristics: Delegation of day-to-day tasks, focus on business development and growth.

• Requirements: Reliable staff, developed processes, and automation systems.

Exit Stage 3: Exit from Managing People

• Description: Moving from managing teams directly to focusing on leadership and higher-level strategic objectives.

• Characteristics: Establishment of middle management, less involvement in operational management.

• Requirements: Strong leadership team, clear organizational structure, performance management systems.

Exit Stage 4: Exit from Operating the Business

• Description: The business operates independently of the owner's day-to-day involvement.

• Characteristics: Business sustainability without active oversight, focus on new ventures or passive income.

• Requirements: Strong governance frameworks, independent operational teams, comprehensive monitoring systems.

Exit Stage 5: Exit from Owning the Business

• Description: Complete disengagement from the business through selling, passing it on, or other forms of exit.

• Characteristics: Capitalization on investment, exploration of new opportunities or retirement.

• Requirements: Attractive business valuation, suitable successor or buyer, legal and financial preparations for transfer.

1.2 Current Alignment

Instructions: Assess where you currently are in these stages and where you aim to be. This assessment helps in planning the path towards your target exit stage.

Current Exit Stage: Identify your current stage:

• Exit 1

• Exit 2

• Exit 3

• Exit 4

• Exit 5

Rationale: Why are you in this stage? 

[Describe here]

Target Exit Stage:

• Identify your target exit stage:

• Exit 3

• Exit 4

• Exit 5

• Goals to reach this stage: What needs to be accomplished to move to this stage? 

  • [Specify here]

• Time frame: Estimate how long it will take to reach your target stage. 

  • [Specify here]

Supporting Questions to Consider:

• What are the main barriers to moving from your current to your target exit stage?

• Are there financial, operational, or market conditions that impact this transition?

• What resources (people, capital, technology) are needed to facilitate this transition?

Worksheet for Step 2: Initial Assessment

Purpose: This step evaluates the owner’s current personal and business goals, financial readiness for exit, and accurately identifies the current stage of exit to plan the next steps effectively.

2.1 Owner’s Goals and Objectives

Instructions: List and clarify both your short-term and long-term goals that influence your business decisions and lifestyle aspirations.

• Short-term Goals:

  • Business Goals: [e.g., Increase revenue by 20%, enter two new markets]

    • Objective 1

    • Objective 2

    • Objective 3

  • Personal Goals: [e.g., Achieve work-life balance, take a sabbatical to learn a new skill]

    • Objective 1

    • Objective 2

    • Objective 3

  • Financial Goals:

    • Current Monthly Revenue

    • Target Monthly RevenueWithin 3-Months

• Long-term Goals:

  • Business Goals: [e.g., Scale to become a market leader, diversify service/product offerings]

    • Objective 1

    • Objective 2

    • Objective 3

  • Personal Goals: [e.g., Prepare for semi-retirement, transition business leadership]

    • Objective 1

    • Objective 2

    • Objective 3

  • Financial Goals: 

    • Current Monthly Revenue

    • Target Monthly Revenue At Your Target Exit Stage

Questions to Reflect On:

• How do these goals align with your personal values and vision for your life?

• What are the potential challenges in achieving these goals?

• Are your current business strategies aligned to help you meet these goals?

2.2 Business Valuation Goal Assessment

Instructions: Determine the financial target required to exit the business, considering personal financial needs and lifestyle costs post-exit.

• Personal Budget Analysis:

  • Current Monthly Expenses: [List major expenses: mortgage, education, healthcare]

    • Monthly Expenses:

  • Expected Changes Post-Exit: [Anticipate changes: increase in leisure spending, decrease in work-related expenses]

    • Future Monthly Expenses:

• Life Goals Financial Analysis:

  • Post-Exit Aspirations: [e.g., Traveling, starting a new venture, volunteering]

  • Estimated Costs: [Provide financial estimates for these activities]

• Freedom Number Calculation:

  • Required Annual Income: [Total of post-exit expenses and aspirations]

  • Business Sale/Revenue Needed: [What do you think the business needs to be worth or generate for you to safely exit]

Worksheet for Step 3: Strategic Exit Planning

Purpose: To define a clear and actionable exit strategy that aligns with both the business valuation and the personal goals of the owner, and to plan the resources and timeline needed for a successful exit.

3.1 Exit Strategy Selection

Instructions: Evaluate and select the most appropriate exit strategy based on the current valuation of the business and the personal and financial goals established in previous steps.

• List Possible Exit Strategies:

  • Sell to a third party: Ideal for maximum immediate financial return.

  • Sell to management or employees (MBO/ESOP): Useful for preserving the company's legacy and culture.

  • Merger or acquisition: Good for expanding market reach and resources.

  • Passive ownership: Transition to a passive role while retaining ownership benefits.

  • Family succession: Keeping the business within the family.

  • Liquidation: If exiting the industry or shutting down is necessary.

• Evaluate Suitability:

  • Goals Alignment: How each strategy aligns with personal and business goals.

  • Financial Impact: How each strategy affects financial outcomes.

  • Risk Assessment: Potential risks associated with each strategy.

• Select Strategy:

  • Chosen Strategy: [Document the selected strategy here]

  • Justification: [Explain why this strategy is the best fit based on goals and valuation]

3.2 Timeline Creation – To Get To The Next Exit(s)

Instructions: Develop a realistic timeline for achieving each phase of the chosen exit strategy.

• What is the NEXT exit you need to achieve on your journey?

  • Exit 1

  • Exit 2

  • Exit 3

  • Exit 4

  • Exit 5

• Major Milestones To The Next Exit:

  • Preparation Phase: [Date]

• Days

• Weeks

• Months 

• Years

• Execution Phase: [Date]

• Days

• Weeks

• Months 

• Years

• Optimizing Phase: [Date]

• Days

• Weeks

• Months 

• Years

3.3 Resource Allocation

Instructions: Outline the necessary resources, including financial, human, and other materials, required at each exit stage to implement the strategy effectively.

• Financial Resources:

  • Estimated Costs: [List estimated costs for legal, advisory services, taxes, etc.]

  • Funding Sources: [Detail potential funding sources, e.g., savings, loans, investors]

• Human Resources:

  • Internal Team: [Roles needed, e.g., CFO, legal advisor]

  • External Consultants: [Roles needed, e.g., business broker, financial advisor]

• Other Resources:

  • Technology and Systems: [Any tech or systems needed for transition, e.g., data rooms, communication tools]

  • Physical Assets: [Any changes or dispositions required]

Worksheet for Step 4: Action Plan Development – Upvalue Sell For Continued Next Steps

Purpose: To develop a comprehensive, step-by-step action plan that clearly outlines the tasks needed for transitioning between exit stages, assigns appropriate roles and responsibilities, and sets measurable performance metrics.

4.1 Systematic Steps

Instructions: Break down the transition from the current exit stage to the next into manageable, actionable steps. Detail each task required to facilitate this transition.

• List of Transition Steps:

  • Step 1: [e.g., Complete business valuation assessment]

    • Tasks:

      • Task 1: Hire a professional appraiser

      • Task 2: Gather necessary financial documents

  • Step 2: [e.g., Prepare business for sale]

    • Tasks:

      • Task 1: Improve operational efficiency

      • Task 2: Strengthen customer relationships

  • Continue for each step required for transition

4.2 Role Assignments

Instructions: Assign roles and responsibilities for each task in the transition plan. Ensure each team member understands their duties and the expectations for their role.

• Task and Role Assignment Table:

  • Task: [e.g., Hire a professional appraiser]

    • Responsible Person: [Name or position]

    • Due Date: [Set a deadline]

  • Task: [e.g., Improve operational efficiency]

    • Responsible Person: [Name or position]

    • Due Date: [Set a deadline]

  • Continue for each task

4.3 Performance Metrics

Instructions: Establish clear, measurable metrics for evaluating the success of each exit phase. These metrics will help in monitoring progress and making necessary adjustments.

• Performance Metrics Table:

  • Exit Phase: [e.g., Preparation for sale]

    • Metric: [e.g., Increase in business valuation by 10%]

    • Method of Measurement: [How will this metric be measured?]

    • Target: [Specific target that defines success]

  • Exit Phase: [e.g., Business sale process]

    • Metric: [e.g., Secure a buyer within 6 months]

    • Method of Measurement: [How will this metric be measured?]

    • Target: [Specific target that defines success]

  • Continue for each relevant exit phase

Action Items:

• Develop Tracking System: [Specify how progress on metrics will be tracked and reported]

• Review and Adjust: [Plan regular review meetings to assess progress against metrics and adjust plans as necessary]

This worksheet is a critical tool for business owners as it provides a structured approach to executing the strategic exit plan, ensures accountability through assigned roles, and enables continuous performance evaluation with defined metrics. By following this detailed, systematic plan, owners can enhance their likelihood of a successful business transition, thereby maximizing their value and achieving their exit objectives.

Step 5: Business System Checklist Review - Pre-Work Delivery For Continued Next Steps

• System Assessment: Use a comprehensive checklist to assess existing systems against requirements for the targeted exit stage.

• Gap Analysis: Perform a gap analysis to identify discrepancies between current systems and desired state.

• System Prioritization and Enhancement: Prioritize and plan enhancements or implementations needed to fill the gaps.