E341 - Exiting or transitioning your business involves a great deal of preparation and navigation | John Ovrum

The One Big Tip Podcast with Jeff Mendelson

John Ovrom is the President and Founder of Exit Consulting Group and the author of Exit & Answers: Navigate Your Business Exit Like an Expert. John specializes in creating roadmaps for business owners anticipating a transition, whether transferring the business to family or employees or selling to a third party. As a serial entrepreneur, he understands the day-to-day challenges of running a business and knows the stress of cash flow, the need to make payroll, paying the taxman, and the tension of being wrongfully sued. With his experience of owning large and small companies with 1-50 employees, John provides consulting and brokerage services for business owners preparing for executing their exits.

John believes that an entrepreneur is not a business owner or an employee and certainly not something you learn at school. An entrepreneur is a personality type, which comes with both strengths and weaknesses. People are scared that if they do something wrong or risk something, they're failing and that's not how entrepreneurs look at it. It’s the tenacity and the mindset that you need in order to be an entrepreneur and break through the non-tangible assets that you learn over the years. Entrepreneurs are cowboys and street fighters, a special class of people. Creating something out of passion or pain that they're trying to solve and leave the world in a better place.

Ultimately create a transition so that you can sell your business for a profit and move on to newer and better things. Every business owner will have to prepare an exit plan. If you die, get disabled, leave, or sell it, the company needs to survive without you. John breaks it into three steps. Dealing with owner readiness, business readiness, and market readiness. You can’t just sell your business the way you sell a house or a car. It’s all about the transition because owners are so involved in the company, the employees, the vendors, the suppliers, and the process that they can't just walk out the door and say, here's the keys.

Running your business with wagon wheel management, being in the middle where everyone reports to you, thinking no one else can do it as best you can but when you step out, the wheels will fall off. John typically looks at your customer concentration, supply, product services, organization, and management team to see if your business can run without you and not struggle when you make your exit. Getting committed to the time of exit, because typically business owners have control and trust issues. Hiring professionals means you won't have to represent yourself in court or file your own tax returns and be part of an IRS audit. They will help you through the process of releasing your involvement and get out with no setbacks.

In this episode:

[02:37] John describes what being an entrepreneur means.

• Carrying the burden and the gift and dealing with exiting as part of the transition.
• You don’t get trained or taught to be an entrepreneur.
• A special class of people who are going to take over the world.
• Having a passion or a pain that they're trying to solve.

[06:55] When the time comes to exit your business.

• Their identity is so aligned with their business that it’s a real challenge.
• An asset to sell or transfer to your family, or someone willing to pay top dollar for it.

[09:01] The transition process of moving on to newer and better things.

• The business owner is the best one to prepare it.
• Design an exit plan for your company to survive without you.
• It’s just like an estate plan when it comes to what happens when you die.

[12:01] Figuring out how the company can survive without the owner.

• Typically starting with a triggering event like a liquidity event.
• Working out how much money you need.
• Your customer concentration, supply, product services, organization, and management need to run without you.

[15:01] When owners are so involved that it becomes difficult to sell.

• The company doesn't need you, you need the company.
• Reasons why they don’t leave, comes down to their purpose and value.

[20:23] John explains the transaction process after the roadmap is created.

• You can anticipate a transaction to take a year to three years, depending on your involvement.
• Getting to not show up to the office anymore and are no longer involved.