Chief executives planning to work 1 to 5 years, sell your company and then retire: TAKE NOTICE! You may have to work longer! Why? Because selling and exiting are not the same thing, and when done simultaneously may not produce an environment for maximizing shareholder value. However, proper planning can greatly increase an owner/CEO's chances of exiting earlier rather than later.

Let's assume that the goal of any sale process is to maximize value to the shareholders. Achieving maximum value in a sale process most often occurs when one or more buyers believe they will gain a strategic advantage by acquiring your company. What characteristics of your company create strategic value?

• Management talent
• Geographic reach
• Niche products
• Excess manufacturing / distribution capacity
• Superior operating margins
• Strong customer relationships
• Leveraging the buyer's distribution channels
• Technology
• Eliminating competition

While some strategic acquirers possess the management talent to effectively integrate an acquisition with little need for the existing management team to remain in place, this is clearly not the norm. Therefore, you should expect that the buyer will place a heavy emphasis on your management team's ability to create additional value going forward.

The first dilemma many of our clients face is that the owner/CEO is central to the success of the business. Believe it or not, there are still many companies in existence today where the CEO signs off on nearly every decision. Moreover, companies with enterprise values less than $50 million usually do not have a lot of management bench strength. So what's an owner to do?

One option is to sell earlier rather than later. As long as you don't expect the value of your business to increase materially over the next 1 to 3 years, selling now is the simplest way to meet the buyer's management retention expectations while keeping you on your personal schedule of exiting/retiring in several years. Nothing comes without potential pitfalls, however. You should be psychologically prepared to work for someone else. For many owners, this can be the hardest hurdle. It is also critical that you fully understand the acquiring company's expectations of you post-closing and incorporate those expectations into an employment agreement. This agreement will cover everything from compensation to operating responsibilities and helps to eliminate any potential misunderstanding as to future expectations.

Another option is to have a management team or key manager in place that allows you to step away with little or no involvement after the sale. Even if the owner/CEO has micro-managed the business right up until the time of sale, a quality management presentation that properly exposes the management team to potential buyers is critical to the overall success of the transaction in price and terms, as well as the owner's ability to exit under his or her own terms. Each key team member should be assigned various speaking roles and go through at least one "dry run" prior to presenting to potential buyers. The dry run should include a Q&A session to prepare the team for the buyer's questions.

Properly timing a business for sale is an inexact science at best. It is very difficult to time the market, specific industry trends, when a new product will take off, or the next economic downturn. However, with a little planning and proper positioning, an owner/CEO can control his or her own destiny in timing a sale and exit from the business.

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