events are contemplated, and
retirement/reinvestment into another
business is evaluated. At the same
time, the successful restaurateur
often spends more time in pursuit
of another passion. At this point, the
“lifestyle inflection point,” it is common
for the business to experience a
period of slower or static growth.
S TAGe 4: Transition/Exit. The franchise
owner or restaurateur has spent a good
portion of his or her professional life
building a successful concept and
realizes a bulk of his wealth is tied up in
the business. Accordingly, as a matter
of intelligent wealth management,
he or she concludes that it’s time
to diversify assets by harvesting the
success of the business before these
decisions are forced on the operator.
As with any transaction, a disciplined
portfolio strategy is a critical factor in
determining a company’s ultimate
value upon a liquidity event. A
disciplined portfolio strategy requires
establishing objective performance
measurements and constant assessment
of market conditions to best gauge
the most advantageous timing for
a possible exit/liquidity event.
why. Lifecycles differ, and it can be
difficult to predict when each owner
will reach the lifestyle inflection point.
Passive vs. Active Involvement.
Professional investors are passive
in the day-to-day operations of
their investments, enabling them
to focus exclusively on the overall
strategic performance attributes of an
on the other hand, are consumed by
day-to-day responsibilities and active
management that often fulfills a much-needed sense of accomplishment, in
addition to providing their income.
As a result, they rarely focus on the
ultimate value of their investment
or on a strategy for harvesting that
value, as professional investors do.
Emotional Attachment. An
entrepreneurial owner generally has
a passionate attachment to his or her
business. It is a living, breathing entity
that he or she has created. In a very real
sense, it’s the entrepreneurial owner’s
“baby.” Dealing with separation from
the business and its ultimate sale,
therefore, can often be difficult for them
because the enterprise is more than their
livelihood—it becomes a large part of
their identity. A professional investor,
on the other hand, has no emotional
involvement with the business. As a
general rule, it is much simpler for
a professional investor to liquidate a
position than it is for an entrepreneur
to sell a business built over a lifetime.
The key implication of the E-curve
and a disciplined portfolio strategy
on a successful exit event is
coordination. Though seemingly
obvious, aligning these two factors
is the key to a successful liquidity
event for a restaurant entrepreneur.
The Price of Delay
Given future growth prospects for the
business and the entrepreneur’s active
and personal involvement in managing
the company, objective performance
measurements are not the sole criteria
in determining the optimum time to sell
a business. For instance, if the owner
is in the early portions of stages 1-3,
the liquidity decision is not optimal—
there is much growth ahead and,
thus, even if the market is favorable,
the stage of the lifecycle is not.
continued on page 32
Professional investors, such as private-equity firms, institutional traders,
pension funds, and others, have long
understood the importance of applying
a disciplined approach to harvest their
profits. Their sole focus, just as it is for
the business owner, is the profitability
and ultimate capital gain from their
investments. However, there are three
key differences between a professional
investor and an entrepreneur in the
process of attaining this goal, and
the differences can have profound
implications on their respective
approaches to exit strategies.
The key differences are as follows:
We unlock existing equity and
convert it into working capital.
Utica Leaseco, LLC specializes in providing asset-based financial
solutions in the form of sale/leaseback transactions for complete operations
utilizing machinery and equipment as collateral.
Definitive Profit/Timing Objectives.
Professional investors typically set a
specific time frame for which they
intend to hold an investment and/or a
specific level of profitability they seek.
When those events occur, they are
disciplined in executing an exit strategy.
By contrast, an entrepreneur-owner, in
most cases, does not establish specific
objectives related to timing or capital
gain profitability. It’s easy to understand
To learn more about how Utica Leaseco can be the key to
solving your cash flow issues:
Utica Leaseco ◊ 44225 Utica Road ◊ Utica, MI 48317
David.Levy@UticaLeaseco.com ◊ www.UticaLeaseco.com