Do you have a plan when and how your going to transition out of your business? More than likely, the last thing on your mind is when and how you’ll leave your business that you’re completely focused on making as successful as you can. However, if you’re like most small business owners, your wealth is illiquid, invested in you’re privately held business. If so, how are you going to harvest this wealth out of your business? Will future generations assume the business and pay you a pre-determined value over time, will you sell it to an outside buyer, how will these purchase be financed, or will it dissolve itself from being tired or no longer able to compete with newer customer solutions.
As many as 80% of all businesses, that are listed with a business broker, are never sold as an ongoing business. The assets are sold off, the real estate is sold for other purposes or they just close. Having an exit strategy and being prepared to sell your business at the right time or when the opportunity presents itself will ensure this never happens to you. Just as important as planning is to starting and operating your business, is planning for your inevitable exit.
Knowing the value of your business, understanding how your banker might assist a buyer in purchasing your business, tax implications, and knowing what factors influence a buyers decision to purchase a business will help you prepare for knowing when the right time is to sell your business or confidently respond to an un-solicited offer.
Without this knowledge it is unlikely you will be able to pick the optimal time to sell your business. There are many things out of your control that will influence the likelihood and price you might realize for your business once you decide to sell. Economic conditions, interest rates, availability of buyers, family/health issues, the time it takes to sell the business, and personal burnout all are factors that will influence the sale and price of any business.
Your exit strategy should be reflective of your personal goals. Knowing the amount you need your business to net in a transfer of ownership will influence how you manage the financial and operational status of your business and guide your long term and short-term investments.
A wise man once said, “the day I bought my business was the day I began preparing for its sale”.
The options and ultimate solution may change many times over the years but it should always become an integral part of your Strategic Plan.
Exit Planning helps you with:
- Setting long term and short term goals
- Maximizing the value of your business
- How you invest in your business
- Debt Management
- Preparing you and your business for transition
- Hiring of key employees and manager(s)
- How you take money out of the business
- Desirability to a potential buyer