There is so much complexity that surrounds business exit strategy planning. Some owners dream of selling their business for a lucrative payout. Others want to leave the business to their children and keep it in the family. And then, there are those who want to retire in the business and just keep working forever.
No matter what each business owner says they want to do, many of them have not done enough to put that strategy into action. Equity in a business is often the owner’s biggest and most valuable investment, and a scattered approach can lead to problems for owners and their families.
Here are four common misconceptions that can create a false sense of security for business owners. The good news is that all of these can be resolved with a good exit plan.
If you want to get the most money for your business, you must prepare to meet the expectations of prospective buyers. Are your processes fully documented and streamlined? Do you have contingencies in place for when valuable employees leave? How easy will it be for the new owner to remain profitable in the business?
It takes a lot of time and effort to properly prepare your business for sale or transition. The best time to get started is when you open your business. The next best time is today. Don’t wait until you’re ready to sell to start planning your exit.
A lot of business owners hold the optimistic assumption that when it comes time to sell their company, a deal will come together quickly. The right buyer will magically appear — and they will be able to sell the business for a fair amount, in a timely manner, and with no headache whatsoever.
However, waiting around for a perfect buyer is not ideal. Even if you get an offer on your business, this approach leaves you at the mercy of someone else’s timing and cash flow.
In addition to that, only having a single buyer can drive down the sale price. When several buyers compete, you may get a better deal. Finally, selling a business is often a long and arduous process. Even the smoothest transitions have obstacles and challenges. If a deal comes together too quickly, it is likely that you did not get optimal value for your business.
Many owners believe that planning for an eventual sale will start an exodus. They think that employees, suppliers, and customers will take it as a negative sign and go elsewhere.
Thankfully, this isn’t true. Your employees, suppliers, and customers are aware that you won’t live forever. There are ways to address this concern so all of your stakeholders feel comfortable with your exit strategy. In some situations, the sooner you begin planning, the more secure everyone around you feels.
Some owners do not want to step away from their business. They love what they do and can’t imagine life without it.
And that is great, except for one fact. Every owner eventually leaves the business in some way or another. It’s better for business owners and their families when the exit is strategically planned and executed.
So, if your exit strategy is still up in the air, it’s time to get serious about fixing the problem. Think about what you want for your business. Think about what you want for your family and yourself — and work with a financial advisor who can help guide your way.