Exit Planning


If you own a business, there will be a time in your future that you will have to exit it; it’s an inevitable part of life. Will you sell to an outside third party, sell it to a key-employee, or transfer it to a family member? This is an important decision you must make as part of an effective Exit Plan. Unfortunately, far too many business owners have made no plans for the most significant financial event of their lives. Others have done some planning, but still will not get the highest value possible out of the sale of their business; they are not ready to sell.

If you are like most entrepreneurs, the preponderance of your wealth is tied up in your company; it’s your largest asset. Most business owners don’t have an accurate idea of how much their business is worth, because they haven’t obtained a business valuation from a Certified Valuation Analyst. As a result, they are not sure if they will have enough money to live comfortably for the rest of their lives. If they find out that the sale of their business will not generate the amount they expected, they will continue to lead it long after their passion is gone, further decreasing the value for a future sale.

Exit Planning in advance is very important for several reasons:

First, in the next ten years many people born in the “baby boomer” generation are going to be ready for retirement. As a result, there will be many businesses ready for sale. Since, the generation behind this one is much smaller, there could be far more businesses for sale than potential buyers. This will create a “buyers” market. Unless your business is one of the best, you’ll likely get a lower value or perhaps not be able to sell it at all.

Second, even during good times less than half the businesses brought to market actually sell. You must be ready to sell.

Third, if you’re waiting until the economy improves, “as your strategy” you won’t be able to control the timing of your exit, the amount you’ll receive or the terms of payment, or even the type of buyer you’ll sell to. Timing the market is unpredictable at best, a very dangerous strategy.

Last, instead of waiting until the economy improves to begin your planning, your time might be better spent preserving and growing the value of your company so you can sell it at its highest value. This is an integral part of a successful “Exit Plan”.

Concentrating your time and energy on increasing the value of your business as a separate project, or as part of a comprehensive Exit Strategy will make it far easier to sell your company at the price you want, when you are ready to sell.