For some, it’s part of the natural business circle: starting it, running it, and then when you’re ready, selling it to retire somewhere sunny for the remainder of your life……..
But one study shows that for 80% of business owners, it stays a dream. According to the Exit Planning Institute, it’s because they don’t have any exit strategy nor did they ever really plan for one.
Are you one of those businesses?
What Is an Exit Strategy?
It seems that many business owners, even if they decide to sell their business early on, don’t actually start preparing for it until near the very end. At that point, most impose a very short timeline for the process to happen and rush into decisions just to get things over with and close the deal, it will most often mean business owners will have to sell for a lot less than they’d expect. Or end up with an asset sale because of the way they managed the books over the years.
The exit strategy needs to be included in the business plan, you know, the one you hopefully created before you opened up shop. But the numbers show this is not something most business owners include in the initial vision.
Your exit strategy should be crafted based on your business type and size. For instance, if you own a business together with a partner, a possible exit strategy is to sell your share directly to your partner.
If you’re the sole owner, then you may want to sell your ownership through a strategic acquisition, which can give you the best liquidity in the shortest amount of time. But regardless of the type of exit strategy you need, experts agree on one thing: the business valuation is a key component here. If you’ve never had a business valuation I recommend you get one so you know exactly where you’re at.
The business valuation essentially examines your business as a whole to determine its value. This takes into account the business’ financials and all the resources that can be eventually liquidated, as well as market considerations for establishing a fair price.
What Do You need To Do?
If it’s only years along the line, it’s best to start thinking about an exit strategy soon and give yourself enough time to sort through the offers to make sure you don’t get the short end of the stick.
And when it’s time to do a business valuation, you should reach out to an accountant certified in business valuations to get a good estimate of how much your business is worth. In fact, you may want to consider hiring a transition manager when deciding to sell your business. That can help make things go a lot more smoothly and can take some of the stress of your shoulders.
I know you might not want to think about your exit strategy right now, but studies show it’s in your best interest to start the process as soon as possible. Eventually, you may want to sell or have to sell for some unforeseen reason and when that happens, it’s better to have all the pieces in check to make sure you’re getting a fair price on your life’s work.