This whitepaper discusses the six typical stages of a business cycle as it pertains to exit strategy and succession planning.

1. Exit Strategy and Succession Planning:
Tracking to the Business Cycle
By Robert Gellman
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2. The following is presented to help the reader assess the stages of a
business cycle like a road map. Understanding where the cycle is
today and what lies ahead for the economy, should provide insight for
those considering their exit time frame.
The six typical stages of a business cycle are:
1. Economic Slowdown. During an economic slowdown, the
economy is sluggish. Long-term interest rates peak and short-
term interest rates begin to fall. Investors often buy (or invest
in) interest-sensitive companies (e.g., businesses with values
that drop when rates are rising, such as banks, utilities and
other yield-sensitive companies) during this time.
Exit and succession strategy planning
involves looking forward into an
uncertain future. Establishing an
approximate time frame for one’s exit
should involve an assessment of
personal goals and aspirations within
the context of the ebb and flow of the
business cycle.
While it is highly advisable to be aware
of the impact of various cycles on a
particular business and product line,
one must have a general sense of the
impact of business cycles in general.
Exit Strategy and Succession Planning
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3. Economic decline. As the
cycle comes full circle, “early
cycle” businesses are
favorable again.
6.
Economic peak. In an
economic peak, major stock
market indexes (e.g. the Dow
and S&P 500) may dip below
their 12-month moving
averages. Inflation is likely
peaking.
5.
Full expansion. In a full expansion, interest-sensitive
businesses generally peak.
4.
Mid-cycle recovery. During a mid-cycle recovery, interest
rates begin to climb. Signs of inflation loom. Business values
generally perform better than bond prices during this time.
Remember, as interest rates rise, bond prices fall (and visa
versa).
3.
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Anticipated Recovery. During an anticipated recovery, low
interest rates encourage consumer spending. As a result,
consumer-oriented business values (e.g. companies that
manufacture consumer-oriented products, such as food,
beverage and pharmaceutical companies) typically rise, though
values in general are low.
2.

4. Bob Gellman has advised business owners in matters involving wealth creation
and asset protection for over 20 years. As a shareholder of two companies and
Chief Operating Officer of the firm’s wealth management practice, Bob’s
experience includes his participation in his firm’s succession strategy as it merged
with CBIZ, Inc. in 2005. Bob’s experiences led him to author the book, The Seven
Keys to Unlocking the Door to Your Dreams: Exit Strategies for Business
Owners, which establishes the foundation for his workshop of the same name.
Bob continues his practice with CBIZ MHM, LLC as a CPA, Director of Tax
Services and AICPA Personal Financial Specialist.
Planning to exit when market values for a
particular business are at their highest
should be done with an eye toward the
nature of the business and the stage of the
business cycle when that business should
enjoy its best market opportunities.
About the Author
The interest rate yield curve provides a
visual representation of the market’s
interest rate expectations in terms of
magnitude and timing. Tracking the yield
curve provides insight into the upcoming
stages of the business cycle.
© Copyright 2009 CBIZ, Inc. All Rights Reserved.
Exit Strategy and Succession Planning
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Bob Gellman
CBIZ MHM, LL.
(858)795-2110
bgellman@cbiz.com