The reason why 80% of businesses will never be sold

by April Cummins

Every business owner or entrepreneur has an ideal scenario in mind when they create a business from scratch. It could be merely a passion project, a life-long dream or an investment to make a profit and “get out”. For some, it’s just a part of the natural business cycle. They create a business, run it, and when they’re ready, sell it and retire off into the sunset. One study showed that for 80% of business owners, this dream may very much stay a dream. According to the Exit Planning Institute, this is because they don’t have an exit strategy in place. Are you one of those businesses? In this blog, I will go over the reason why 80% of businesses will never be sold.

What is an exit strategy?

In an ideal world, the exit strategy would be included in the initial business plan. This is hopefully something you created before opening up shop. On the contrary, the numbers show this is somewhat of a rarity among most business owners.

Many business owners don’t actually start preparing an exit strategy until the very end. At that point, most impose a very short timeline for the process to happen and rush through decisions just to get it over with. To close these deals and change ownership, it often means business owners end up selling for a lot less than they expected.

Every business’s exit strategy is unique

Your exit strategy should be carefully crafted based on the size and type of your business. For instance, if you own a business with a partner, a possible exit strategy is to sell your share directly to your partner.

If you’re the sole owner, you may want to sell your ownership through a strategic acquisition, which can give you the best liquidity in the shortest amount of time. Regardless of the type of exit strategy you need, experts agree on one thing: business valuation is key.

What is the value of your business?

The business valuation essentially examines your business as a whole to determine its overall value. This takes into account the business’ financials and all the resources that can be eventually liquidated. In addition, this process will examine market considerations for establishing a fair price.

What should you do?

Depending on how long your business has been under operation, it’s best to start thinking about an exit strategy as soon as possible. Give yourself enough time to sort through the offers to make sure you don’t get the short end of the stick.

When it’s time to do a business valuation, you should reach out to an accountant certified in business valuations to get an accurate 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. This can help make things go a lot more smoothly and can take some of the stress off your shoulders.

Signing off

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, and when that happens, it’s better to have all the pieces in place to make sure you’re getting a fair price.

If you have not set up your exit strategy, I can assist you with this. When you are ready to sell and retire, let’s get you the right amount of money with the least amount of stress for your business!

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