The recent catastrophic wildfires in Los Angeles have once again demonstrated the unforgiving nature of unpredictable events. Whether in life or business, the necessity of planning ahead becomes undeniable when disaster strikes. Much like having a will ensures that loved ones are protected in the face of uncertainty, having a well-thought-out exit plan for your business safeguards your financial future and hard-earned legacy.
Many business owners, particularly when their companies are thriving, fail to recognize the importance of preparing for unforeseen challenges. The reality, however, is that prosperity is the optimal time to take proactive steps—such as building strategic partnerships or selling part of the company—so that years of hard work yield tangible financial rewards.
By strategically selling a portion of the business while holding on to the rest, owners not only secure funds to "take money off the table" but also spread the risk by bringing in a partner who shares the future upside. This approach ensures financial security while allowing the original owner to benefit from the continued growth of the business, now bolstered by the resources, connections, and expertise of the new buyer.
The Unpredictability of Catastrophic Events and the Need for Planning an Exit
The Los Angeles wildfires, which claimed homes, businesses, and lives, serve as a stark reminder of how quickly fortunes can change. For instance, in 2023, the catastrophic Maui wildfires in Hawaii devastated the historic town of Lahaina, displacing thousands and causing an estimated $6 billion in damages. Many local business owners, who had been thriving in the tourism sector, suddenly found themselves without assets or income streams. For those without insurance or a contingency plan, the road to recovery has been steep, if not impossible.
Similarly, in Los Angeles, entire neighborhoods and commercial hubs were reduced to ash. Businesses that seemed untouchable—cafés, retail stores, and real estate holdings—were suddenly vulnerable. These events highlight the importance of diversification and preparedness. Much like individuals should ensure their families are cared for through a will, business owners must plan for the unexpected to ensure that their life’s work isn’t erased in an instant.
Why Thriving Times Are the Best Times for Planning an Exit
When a business is flourishing, it’s tempting to assume the good times will last indefinitely. However, market conditions, economic downturns, regulatory changes, and unforeseen disasters can quickly upend that assumption. The lesson here is clear: when a business is performing well, it is the ideal time to consider strategic options for safeguarding its future.
How Planning an Exit During Good Times Mitigates Risks
Planning an exit doesn’t necessarily mean leaving the business entirely. In fact, some of the most successful entrepreneurs and business owners use thriving times to forge partnerships or sell equity stakes to strategic investors or private equity firms. This approach accomplishes several key objectives:
Risk Mitigation: Selling part of the business spreads the risk. In the event of an economic downturn or catastrophic event, the owner has already secured financial security by taking money off the table.
Access to Expertise: Strategic partners or buyers often bring additional resources, expertise, or networks that can propel the business to new heights.
Shared Growth: Retaining a stake in the business allows the original owner to benefit from future growth, often at a faster pace due to the new partnership.
Take, for example, the story of a Los Angeles-based tech company that sold 60% of its business to a private equity firm in 2021. The deal provided the founder with a significant cash payout while ensuring that the firm’s expertise could help scale the business. When economic uncertainty hit in 2022, the founder’s financial security was intact, and the private equity firm’s support helped weather the storm.
Strategic Partnerships and the Role of Planning an Exit
The concept of "taking money off the table" is often misunderstood. Many business owners fear that selling part of their company signals a lack of confidence in its future. In reality, it’s a prudent move to secure financial rewards for years of hard work while setting the business up for long-term success.
Consider the example of the restaurant industry, which was deeply affected by the COVID-19 pandemic. Restaurants that had formed partnerships with private investors or franchising networks before the pandemic were often better positioned to survive. Those partnerships provided not only financial backing but also strategic advice on pivoting operations, such as adopting delivery services or diversifying revenue streams.
In the healthcare sector, a dental group in Southern California recently sold 80% of its practice to a Dental Support Organization (DSO). The move allowed the owner to receive a multimillion-dollar payout while still retaining control over day-to-day operations. With the DSO’s support, the group expanded into new markets, achieving greater profitability than the owner could have achieved alone.
Lessons from the LA Fire for Business Owners Considering Planning an Exit
The LA fires offer powerful lessons for business owners about the value of foresight and planning. Just as individuals in fire-prone areas invest in insurance, evacuation plans, and fire-resistant construction, business owners must invest in an exit strategy to protect their assets. Here are three key takeaways:
Prepare for the Unexpected: Catastrophic events—whether natural disasters, economic downturns, or industry disruptions—are inevitable. Having a plan ensures resilience.
Act During Good Times: The best time to plan an exit is when the business is thriving. Waiting until a crisis hits often reduces options and valuation.
Leverage Partnerships: Strategic buyers or investors can provide financial security and growth opportunities, creating a win-win scenario for both parties.
Final Thoughts on Planning an Exit for the Future
The devastation caused by the LA fires is a stark reminder of how quickly circumstances can change. For business owners, the lesson is clear: planning an exit is not about giving up on your business—it’s about ensuring that your hard work translates into long-term financial security. Whether through selling a portion of the company, diversifying assets, or forming strategic partnerships, the right plan can protect against the unpredictability of life and business.
Taking these steps is much like writing a will. It’s not something you do because you expect disaster—it’s something you do because you recognize the importance of preparation. By planning ahead, you safeguard your legacy, protect your assets, and position yourself to thrive no matter what the future holds.
If you’re a business owner considering an exit strategy or looking to build strategic partnerships, now is the time to act. Don’t wait until circumstances force your hand—proactively secure your financial future and ensure that your years of hard work are protected.
Dr. Allen Nazeri, aka "Dr. Allen," boasts over 30 years of global experience as a healthcare entrepreneur. He is the Managing Director at American Healthcare Capital and Managing Partner at PRIME exits. Dr. Allen provides strategic growth consulting to leadership teams of both privately held and publicly listed companies, ensuring their preparedness for successful exits.
He holds a Dental Degree from Creighton University and an MBA in M&A and Investment Banking from the University of Bedfordshire. He is a Certified M&A Professional (CM&AP) from keenesaw State University. Dr. Allen is the author of the brand new book "Selling Your Healthcare Company at a Premium". Dr. Allen offers a free valuation to business owners ready for a partial or complete exit strategy. Dr. Allen collaborates with strategic buyers, private equity firms, and institutional investors, taking direct accountability for the annual successful sell-side representation of nearly $750M in enterprise value.
To have a confidential discussion about your company and receive a free valuation, please email Allen@ahcteam.com or Allen@ahcpexits.com
You can also now communicate with Dr. Allen's clone https://www.delphi.ai/drallen
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