Pulling the Rip Cord

Doctors are quick to encourage patients to plan for the end, with living wills and other documents. Physicians who own their own practices should follow the same advice and craft an exit plan.

Almost all doctors have taken care of terminally ill patients. For some, the patient's death is elegant, respectful, planned, and peaceful with respect for dignity. For others, there are uncomfortable family confrontations, arguments about DNR requests in the ICU, prolonged agony, and money wasted on futile care. The ICU family experience can be even worse. When appropriate, we all advise patients and their families to sign living wills, assign durable power of attorney, certify DNR requests, and plan for the end. Doctor, when it comes to your business, follow your own advice.

Stephen Covey, in his best-seller, “The Seven Habits of Highly Effective People,” reminds us that highly effective people plan with the end in mind. The same holds true of business owners. Unfortunately, after spending a lifetime building and operating a business, some owners spend more time thinking about how they will get rid of their golf clubs, or their spouses, than their business. Exits are a key part of business planning and can take the form of IPO's (Initial Public Offerings), ESOPS (Employee Stock Option Plans), MBO's (Management By Outs), LBO's (Leveraged Buy Outs), M & A's (Mergers and Acquisitions), and EOTUTS (Every Other Thing Under the Sun).

Think about selling your business like you would selling your house or selling your practice. There are several basic stages and things to do:

  1. Define your objectives: Why are you selling your business and what do you want to get out of it?
  2. Prepare your business for sale: As any of you who have tried to sell your house recently knows, you will need to spiff it up as best you can, creating curb appeal, painting, fixing the neglected odds and ends, to get it in tip-top shape. The same holds true for your business.
  3. Find the right buyer: Who will be interested in buying your business and why? Strategic buyers, financial buyers, private equity groups, employees, management?
  4. Get the deal done: Whom should you consult to help? What due diligence needs to be done and by whom?
  5. Now what? What will you do with that pile of cash, all that free time, and the people who are now your best friends?

There is a section of every business plan that describes the exit. My favorites are the bold and the beautiful approach: "We plan to be acquired by the biggest pharmaceutical company in the world for our game-changing, world-class, outrageous value-added products" or the subtle, self-effacing approach: "We just want to build a nice little company and see what happens." Of course, whatever you say, most everyone knows it won't work out that way. Whatever happens, do some exit planning so you don't wind up screaming at your business partner in the ICU.