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Selling your business? Part 1: Developing a successful exit strategy
Selling your business?
Part 1: Developing a successful exit strategy
by Peter Thelen Sr., CPA, FMC, President of Thelen Financial
Photo by Andrew Teoh on Unsplash
As I look around the industry and see the volume of deals and the quality of deals, I think its timely to talk about the process of getting your company ready to take to market.
As your landscape business grows, you will inevitably face the question of how and when to exit the business.
Whether you are selling your business because you’re looking to retire, move on to a new venture, or simply want to cash out for liquidity purposes, formulating an exit strategy is critical to ensuring that you get the highest price possible and leave your business in good hands as it grows forward.
In this three-part series, we’ll look at the five steps you need to take to formulate a successful exit strategy for your business. > This article will unpack what an exit strategy is and how to identify your reasons for wanting to exit your business. > Part two will look at the different ways in which you can go about exiting, and how to value your business for sale. > Finally, in part three, we’ll tell you how to ensure a smooth transition for both you and your business, and how to determine the best route to achieving financial freedom through your sale.
What is a business exit strategy?
An exit strategy is a plan for how you will sell or transition ownership of your business. This is an important issue to consider early on, as it can have a big impact on the value of your business and your ability to sell it when the time comes.
There are many ways to exit a business, and the right strategy for you will depend on your individual circumstances. The most common exit strategies are: 4
Selling to a strategic buyer.
A strategic buyer is typically another company in your industry that is looking to acquire your business to expand their market share, add new products or services, or gain access to your customer base.
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4
Selling to a financial buyer.
A financial buyer is typically an investment firm or private equity group that is looking to invest in your company and grow it over time. They may eventually sell your company to a strategic buyer or take it public through an initial public offering (IPO).
Passing the business on to a family member or employee.
If you have a family member or employee who is interested in taking over your business, you can transition ownership to them through a process called succession planning. This can be a great way to keep your business in the family, or to reward a key employee for their loyalty and dedication to the company.
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Closing up shop.
In some cases, you may decide that it’s time to close your business entirely. This is typically only an option if your business is not doing well financially, or if you are ready to retire and have no one to take over the business. As you can see, there are a variety of different exit options available, and the right strategy for you will depend on your specific goals and circumstances. In the next section, we’ll explore how to identify your reasons for wanting to sell your business, so that you can choose the exit strategy that’s best for you.
The first step in formulating your exit strategy is to identify your reasons for wanting to sell the business.
This helps determine what type of buyer you’re looking for, what kind of price you’re willing to accept, and what type of post-sale role you’re interested in (if any).
There are several reasons you may want to exit your business, and it’s important to be clear about your motivations before moving forward. Some common reasons for wanting to sell include: 4
You’ve given your business everything you’ve got and you’re ready for a new challenge.
If you’ve been running your business for many years and you’re starting to feel burnt out, it may be time to move on to a new venture.
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You want to cash out and retire.
If you’re ready to retire, you’ll want to sell your business for the highest possible price so you can enjoy a comfortable retirement.
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4
You’re ready to move on to a new project.
If you have another business idea you’re eager to pursue, or if you’re just ready for a change, selling your current business can give you the opportunity and startup capital to start fresh.
Your business is not doing well, and you want to cut your losses.
If your business is struggling financially, you may decide to sell it to avoid further losses.
Whatever your reason for wanting to exit your business, the single most important element of a successful exit strategy is planning. Some business owners start thinking about an exit strategy only when they’re ready to sell but the best time to start planning your exit is three-to-five years before you want to exit. This will give you the time you need to put the right systems and processes in place, so your business is in the best possible position when it comes time to sell.
Another important consideration that many successful businesspeople note is identifying what you will do after you implement your business exit strategy. What are your plans and goals for the future? What other businesses or projects do you want to pursue? What is your ideal lifestyle? Answering these questions ahead of time will help to ensure a smooth transition once you’ve sold your business and will give you the motivation you need to stick to your exit strategy or follow through with your succession plan, even when it gets tough or seems overwhelming.
Our final thoughts on Part 1
As you can see, knowing your “why” is an essential first step in creating a successful exit strategy. Having this clarity allows you to determine what type of buyer you’re looking for, what kind of price you’re willing to accept, and what type of post-sale role you’re interested in. In Part 2, we’ll delve deeper into the process of formulating an exit strategy, including an assessment of the different ways you can exit your business and how to come to a fair personal and market valuation of your business.
If you’re seriously thinking about selling your business and need expert guidance to formulate the right exit strategy that speaks to your “why,” reach out to Thelen Financial, Inc. today to schedule a consultation. It’s never too early to start planning your exit and, with professional help, you can ensure that you put the right measures in place to make your transition a smooth and successful one.
About the author
Peter Thelen is Founder of Thelen Financial, A Georgia Urban Ag Council member.. Thelen Financial provides advice and solutions in areas of administration, risk, strategy, and financial capital to owner operators of landscape companies who want to grow profitably and avoid costly mistakes.
Thelen Financial, Inc. 107 W. Courthouse Sq. Ste 111 | Cumming GA 30040 770-527-6574 | pthelen@thelenfinancial.com
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