Intentional Growth #315: Understanding the 5 Main Exit Options for Your Business with Ryan Tansom
Ep. #1 [THEME FIVE]
Today we’re kicking off our next mini-series theme: Through the Eyes of the Buyer: Understanding Your Exit Options.
In this episode, host Ryan Tansom is running solo and lays the foundation for the following episodes where he interviews a wide variety of business buyers. Today Ryan gives an overview of each of the 5 major exit options and how you, as a business owner, can decide which exit option is best for you.
When listening to this episode, it’s important to remember the concept of “ownership vs. management roles” and how they need to be separated so you can learn how to build a path forward for each. This is extremely important because your management role and ownership role (your equity) are impacted differently with each exit option.
For example, you could exit your ownership role by selling the equity in your business (your financial asset) AND continue running the company as the CEO if you want, OR you could quit your W2 job while still staying an owner by keeping your equity in the business.
Like many of our listeners, you may be asking questions like: “Even though I don’t want to sell, what are all my exit options and how do they work?”; “Which exit option is best for me?”; or “How do I know if I am handing the keys to my business over to the right buyer?”
Today’s episode is a great starting spot to help you clarify the variety of ways you can exit a company and what’s important to think about as you begin to explore the topic.
// WATCH THE INTERVIEW ON YOUTUBE: Intentional Growth™ Podcast
What You Will Learn
- Introduction to the 5 main exit options in the Intentional Growth™ Principle #3:
- Why, and how, Arkona chose these 5 main exit options.
- The importance of understanding the difference between your ownership and management roles on the various exit options.
- Things to consider when looking at an internal transfer/buyout.
- What an acquisition entrepreneur/search fund is, how it works, and why it’s become popular.
- Overview of what an ESOP is and how it works.
- Why an ESOP can provide some huge tax breaks.
- Overview of the private equity landscape and the different flavors that have started to become popular.
- Why all private equity firms are not created equally.
- Ways to figure out if a business buyer’s core values are aligned with yours.
- How to compare each buyer with your “why.”
- The typical motives behind a strategic buyer and things you should be aware of.
- How to use your “why” and your “financial targets” as a lens to analyze the various exit options so you are clear on what you want and why and aren’t left with any regrets.
// USE YOUR FINANCIALS TO CLARIFY A PATH TOWARDS A MORE VALUABLE BUSINESS: Intentional Growth Financial Assessment
Interview Quotes:
07:18 - “There are ownership versus management roles. You can have equity in a company and not have a job. Private equity, that’s an entire industry. It’s what they do.” - Ryan Tansom
09:50 - “There’s almost an infinite amount of ways you could structure your ownership sale and/or what you can do with your job.” - Ryan Tansom
10:00 - “We need some sort of framework to understand what our choices are.” - Ryan Tansom
11:53 - “There’s another layer of this a financial sale most often and that is the intrinsic financial value of a company based on the risk of the cash flow.” - Ryan Tansom
14:14 - “There’s these programs going on in these Ivy League schools now teaching people how to buy companies. So someone could come out of Yale and they’ve got a bunch of student debt, they don’t have a pot to piss in for wealth. But they hypothetically have the skills to run a business.” - Ryan Tansom
17:30 - “If you do a 100% ESOP, the company no longer pays federal or state income tax. So there’s a lot of additional cash flow to service the debt.” - Ryan Tansom
23:47 - “The private equity firms have been going down-market to try buy smaller companies because there aren’t a lot of good companies to buy in the middle to upper market.” - Ryan Tansom
27:00 - “What do you want? What do you want from your business and why?” - Ryan Tansom
Links and Resources:
Episode 310: “Intrinsic Financial Value - The Value of a Business Based on the Risk of its Cash Flow with David Diehl”
Episode 276: “Branding for Buyout with Ted Schlueter”
The 5 Intentional Growth™ Principles (5 Videos to Help Clarify Your Vision)
Intentional Growth™ Financial Assessment
You can also reach out to me via email at rtansom@arkona.io, or on my LinkedIn.