Sooner or later we will all exit our companies.
What will our company be worth when that happens?
When will we realize that worth?
What can be done to maximize that worth?
When do we start to plan and execute to assure the realization of maximum return on the investment we have made to build our company?
This BYOL Plus segment will feature 5 CEO's and a Remarkable Speaker that will respond to this topic.
Remarkable Speaker: Jim Douglass https://www.linkedin.com/in/jim-douglass-04b1254/
Moderator: Scott Burkett https://www.linkedin.com/in/scottburkett/
I spoke with a close friend today and was asked to post the following:
"Question: “I am co-founder of a well-established training firm (less than 50% ownership), and am planning an exit strategy to retire. There is no board of directors other than myself and the co-owner. How do we protect our interest in achieving an equitable outcome without damaging our personal relationship?
Hopefully a buy sell agreement is already in place. The best way to protect all the parties (personally and financially) is to know going in how one might exit. A good buy sell agreement would establish valuation, sell process, and exit scenarios.
Scott - thank you - in this case the buy sell agreement is not in place.
That makes it very tough but not impossible. It's not just about numbers but I would use my "owners benefit" - compensation, dividends, perks - to determine the a discounted value for my minority interest in the company. To get the appropriate multiplier, look at similar size organizations and any transactions you may find to set a bench mark. Since it is a minority interest, you'll have to discount it.
Transparency is key in every relationship. I would approach my co-founder with my desire to retire. See how they feel about it. Part of this process would be taking an inventory of your contributions as a founder and in your current role in the company. You want to consider what happens to the business if you retire.
Also, keep in mind, retiring doesn't mean you have to sell, you could continue you collect passive income from dividends until a different liquidity event take place.
Scott - thank you - this "down to earth" ethical advice is appreciated.