"It takes approximately two years of focused activity to get your business ready to sell at a reasonable price.” -Exit Planning Institute
A client once stated that he needed to hire more salespeople and buy more trucks. When asked what the salespeople would do and why he needed more trucks, he couldn’t answer the question. Too often people jump to the next phases of their lives without planning or considering the consequences—unintended or not. Exit planning allows a business owner to formulate and implement a plan that will yield a significantly greater value than originally projected.
Large organizations, and the consultants that come out of them, are notorious for using convoluted approaches to Exit planning. The problem is that these complex methods often do not fit the small business environment where most owners manage their businesses by monitoring fewer than five indicators. The most effective Exit planning methods are those that can be understood and implemented at the entry level of a company.
Exit planning for a privately owned business should focus on basic questions, such as:
- What is my business?
- What is my industry?
- How big do I want to be?
- What do I do next?
As an owner works through Exit planning with an eye toward selling the business, it is important to manage the process well.
Here are 5 tips for staying focused:
- Protect yourself and your business with appropriate legal documents. The proper development of all agreements, financial information, and tax information is imperative.
- The use of a competent and trustworthy intermediary will enable owners to maintain focus on their businesses, while someone experienced in the area manages the process. Most sellers only sell their businesses once. For buyers, buying businesses is what they do.
- Keeping in mind that there are different types of buyers, it is important to avoid placing a price on one’s business; certainly, avoid communicating price expectations to those beyond one’s close professional advisors.
- Too many businesses take a turn for the worse when their owners take their eyes off running their businesses and become enamored with selling their businesses. They lose focus and neglect the very things that made them successful in the first place. A lack of focus at this stage of the game results in a business that can lose tremendous value.
- Any skeletons in the closet of the business should be disclosed and addressed early in the process. Late surprises end deals prematurely and abruptly.
When business owners cannot deliver what they represent, deals are canceled or the business is sold for much less than originally planned. After years of work and sacrifice, is this really the goal?
“Lack of focus at this stage of the game results in businesses that lose value between the beginning of negotiations and the final closing.”
CAPSTONE is here to help you stay focused on your Exit planning and guide you through the process. Reach out to us here to get started.
