Chamber Insider Blog

Exit Strategy Myths for GovCons

Blog Post by J. Patrick McMahon, of McMahon, Welch and Learned, PLLC.
To learn more about the Loudoun GovCon Initiative, click here.

Most small business owners do not have an exit strategy.  Here’s some common reasons why:

1)    My company is too young for an Exit Plan.  Surveys vary but it is estimated that 60% of existing small business owners have not given serious consideration to how they will exit the business.  This is in spite of the revelation that a majority of those surveyed thought that they would exit the business within the next 10 years. 

2)    My company is not valuable enough.  While the value of a start-up business is not usually great, the value of a going-concern after 10 years of work and investment is often considerable – in fact, the small business is often the most valuable asset owned by an individual or a couple – and planning for the exit is therefore of obvious importance.  

3)    Creating an exit strategy is too complicated.  The exit strategy need not be elaborate but an understanding of whether you plan to sell the asset, transfer it to family or employees or simply to shut it down is important to consider because this knowledge can help shape immediate business planning decisions.  Especially in the GOVCON market, selling or otherwise transferring a federal contract requires special planning. 

In any case, it seems a shame to invest in an asset with no other expectation than to abandon it, but approximately 25% of small business owners over 60 years of age do exactly that.  Presumably the owners in these cases have provided themselves with a livelihood but failure to capitalize on the development of the business has yielded nothing more than a steady job.  You are encouraged to focus on the inherent value of the small business asset and thereby build the value of the business, not the job.  Plan early, adapt your plan as the business develops and make decisions based on your exit strategy.

Mr. McMahon has thirty years of experience in representing small and mid-sized business that contract with the federal government.  This is in addition to several years of practice and service in the United States Marine Corp where he served as a platoon commander and later as a member of the Navy Judge Advocate General’s Corps