A Story of Why An Executive Exit Strategy

I learned my first and greatest lesson about executive exit strategies from a business I had back in the late 1980’s. In my case what I would have hoped to be an executive exit strategy based on wealth building turned out to be an exit based on disaster management.

The business was a sole proprietorship with employees. This was my second endeavor as a sole proprietorship, the first being very successful. I just transitioned this newer business from a service industry to a construction/manufacturing environment. I was moving forward with really fantastic growth. The revenues were in the six figures and net margin was running between 17% to 20%. All seemed to be going really great!

Then disaster struck! This was not some natural disaster since there aren’t many of those in the Pacific Northwest. This was an accident to my person. The details of what the accident was are not as important as the results to the business. I do have to say that I was personally laid up for six months and it took a good year before I was really able to engage in any type of labor.

The facts of what happened to me as the president/owner of the company totally affected the business entity. These are key areas that were affected and not planned for by an exit strategy or disaster contingencies (they are in no priority order):

1. No new jobs were bid. Why - A lack of personnel training and succession plan. Result – Employees were laid off do to a lack of scheduled projects.

2. All the administrative responsibilities fell to my wife. She was not involved in the business prior to the accident. Why – Never communicated to her the details of what was going on. Result – Added stress to her life that included a full time job and five-year old twins. Having to deal with vendors, taxing authorities and employees.

3. Cash flow stopped and the collectors came a knocking! Why – No jobs being bid and accepted meaning there was no income. Result – Outstanding debt was being called in. Payroll taxes accumulated and were now having penalties being added. Labor and Industries taxes were due. The business was out of cash.

These points were disastrous for the business as an entity in that there was nothing that contributed to sustainability. What I learned is that many executives in small and even medium businesses have not planned an exit strategy for the business entity let alone themselves or developed a strategy/plan that would include disaster recovery.

Exit Strategies and disaster planning (a part of risk management) are integral to a business plan. In a simple sense they are for the purpose of seeking new capital and showing investors how they will get their return and in a more complex sense for the personal exit of a business executive. I cannot emphasis enough that this is as important as the idea for the business in the first place.

I do work with business executives (NCDCS, Inc. Services Link) in establishing the business entity Exit Strategy as well as personal exit strategies.

New Ideas

I want to add some other personal touches and stories about my life in the business world. I'll link this to the company blogs as well.

One thing I learned is that there is nothing new under the sun but being humans created in the image of a creator gives us that unique ability to derive new ideas or explore existing ideas in innovative ways. I hope to relate real stories that bring insightful meaning to doing business and building wealth. Heck, I'm going to discuss my failures as well as successes.

That is what Life's Lessons are all about.