Exit Strategy Advice from Marcus Lemonis

Marcus Lemonis is known on TV as the Turnaround King, hosting “The Profit” on CNBC.  He goes into businesses that are losing propositions and show them how to rebound and become profitable.  Mr. Lemonis has done this numerous times in his own businesses – he usually buys the business, grows it and keeps it but has sold several for vast profits.

I was particularly interested in the Mergers and Acquisition portion of Mr. Lemonis’ discussion.  Based on age and experience, many business owners over fifty years old are looking for an exit strategy.  This can happen thru either selling the business outright or preparing the business to look for a buyer. Getting our businesses ready for review, gives us a choice in the decisions that we make available to us – to whom to sell (single or multiple people) or whether to stay in business.

Here are Mr. Lemonis’ tips for getting a great sale price for your business:

  1. Early preparation makes all the difference in having a successful business or sale. It is not an event but a journey.  Only 25% of sellable companies have a successful exit.  Many people fail in the final business lifecycle because they did not design their exit and were not in a position of strength.  Start now.
  2. Little things count the most. During the sales process, every portion of your finances is scrutinized.  Clean up your finances now – remove personal expenses from the T&E budget; get your CFO and attorney involved now so that your books are in shape.  Make sure your agreements are transferable.
  3. People is everything. If you want to grow your business or sell it, people matter the most.  Most companies make a purchase based on the people they want to keep in the company and not so much because of the product.
    • Mandate paid volunteerism at least 32 hours per year.
    • Give people a paid sabbatical. If you see someone was a rock star and is going thru a rough time, that person can be rehabilitated by showing you have faith in them instead of firing them.  Because our personal lives reflect on our professional ones, ups and downs show in both places.  Pay them to take some time off to recover – it is less costly than a new hire.
    • Give equity to employees. We are on the same elevator whether it goes up or down. How much are we willing to give up to show the value of our people?
  4. Exit strategy should be clear to all employees. Everyone should be moving in the same direction to accomplish the goal.  Most owners like to deal from a “need to know” basis and it doesn’t get everyone on board.
  5. Only 50% of the people who sell their businesses are happy with the exit. Happy people all had excellent exit strategies and have moved on to something else even after a short stint with the company after it was sold.  The other 50% are lost, miserable, and regretful that they sold it because they enjoyed the job they had.  We must plan to be happy with our businesses.
  6. Get to know your SWOT. Be able to capitalize on our strengths, improve on our weaknesses, take advantage of opportunities and know what threatens our business.

Per Mr. Lemonis, we should talk to people who have exited a business.  Ask what we should do the same and what we should do differently.  Don’t believe any single individual.  Get as much advice as you can for free and then take what you need from it.  Because the M&A market is unregulated, there is no defined process.  We should have our scorecard and do our due diligence.  Our choice is to “build a cathedral or break rocks” – many people break rocks!