Monday, October 24, 2022

The Value of a Strategic Plan

All business owners will eventually exit their business, and I believe it is important for leaders to prepare well to exit well.

There are a number of tactics that owners can implement that will help them prepare well for an exit and achieve a sale-ready posture. The beauty of adopting a sale-ready approach is that it has two powerful benefits.

First, it will make the eventual exit of your business easier, faster, and more lucrative, whenever and however that exit event may come. Business owners in a sale-ready position have invested the time in laying the groundwork that will enable a thoughtful, smooth transition into a sale or other capital-raising process. It will also enable you to respond quickly if you unexpectedly receive an attractive unsolicited offer from a potential buyer.

Second, the process of preparing your business for sale will make your business better, today. Business owners with a sale-ready mind-set think more strategically, have better insights into their companies, and make better decisions on where to take their business next. They, therefore, create a two-fold benefit: when the time comes to exit, they have a more valuable business and are better prepared to exit.

Many business owners understand the value that an annual strategic plan provides for their company’s growth but may under-appreciate its importance in an eventual exit process. Buyers seek to acquire companies at an inflection point, where their capital and partnership can make an exponential difference on the future of the business. Your ability to show potential buyers how you created annual strategic plans and executed upon them in the past will give them the confidence to believe in your current strategic plan and in how they and their capital can help support it going forward. In addition to being a great tool to manage your business outside of an exit process, developing a strategic, actionable, and relevant plan is a key step in maintaining a sale-ready posture.

In this excerpt from Chapter 2 of my book, The $100 Million Exit, Miguel Santos witnessed firsthand how the lack of strategic planning can negatively impact an M&A exit.

Weak Strategy. Weak Value.

In one case, Miguel served on the board of a PE-backed company to help provide market insights and general corporate oversight. The business had grown nicely under the leadership of an opportunistic CEO but suffered from a lack of clear strategic direction and certainly did not have a formal strategic plan. When the time came for the private equity firm to exit, the investment bankers hired to sell the company created an impressive section in the offering memorandum on growth strategy, detailing the five ways in which the company would expand over the next several years.

What buyers would soon learn, however, was that these five growth strategies were not being pursued by management, a classic mistake of overly enthusiastic M&A advisors.

Based only on their review of the offering memorandum, potential buyers bid aggressively for the business, but when the top bidders were invited to meet management, the executive team didn’t live up to the hype. Miguel recalls, “In the management presentation, we had unrealistic financial projections, these hockey stick curves, based on entering market segments that we’d never been in, nor could the CEO show any fundamental way that he had actually capitalized on such opportunities in the past.” With no demonstrable proof of executing against a strategic plan to point to, the CEO came off looking more lucky than good. As a result, buyers either dropped out of the process entirely or lowered their valuations significantly. Ultimately, the company did sell, but at a price more than 15 percent lower than where valuations had been prior to management presentations. In this case, it was easy to quantify the cost of not having a strategic plan.

In another instance, Miguel was on the buyer’s side of the table, partnering with another private equity firm to investigate potentially acquiring an attractive business in the medical transportation space. The company’s business model focused on securely transporting blood and other medical samples from hospitals to centralized testing facilities. The company had grown to more than $30 million in revenue, largely driven by trends in the industry towards centralized testing facilities fueled by consolidation within the healthcare system. The company’s geographic footprint had expanded quickly and included six cities, with plans for further expansion into additional markets.

As Miguel and his PE partner dug in deeper, however, red flags started to emerge. They learned that the company’s units in those six cities operated completely autonomously, with no unifying strategic plan, and they were having trouble replicating the successful aspects of the operation from one city to the other. “Every city unit was sort of succeeding or struggling based on its own operational plan,” Miguel realized. Furthermore, Miguel learned that each location was primarily driven by one anchor client, creating a customer concentration risk for each regional division.

In the end, Miguel and his PE partner decided the company wasn’t worth backing and dropped out of the process. Miguel recalls, “We had to ask ourselves if there was something that was replicable here, if there was a platform that we can build on.” Based on the lack of an operational plan, the answer was decidedly no.


In summary, we strongly encourage business owners to implement a strategic planning process in their business. It doesn’t need to be overly complicated or sophisticated, but it should include three elements. First, set goals for what you’d like your business to achieve over the next 12 months and document those goals with associated metrics. Second, track actual results on those metrics against your plan on a monthly or quarterly basis throughout the year. Lastly, take the time to sit down with a trusted partner or advisor, someone who is outside your company, and report to them your actual results against your strategic plan. This discipline will help you think critically and concisely about your business at a strategic level and allow your next year’s strategic plan to be even better.


Jonathan Brabrand contributed this post. It is adapted from his book, The $100 Million Exit: Your Roadmap to the Ultimate Payday. Jonathan is a Managing Director at Transact Capital Partners, a boutique M&A advisory firm and long-time corporate sponsor and supporter of the Virginia Council of CEOs.

Posted by Scot McRoberts at 2:19 pm
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