5 Steps to Creating an Excellent Exit Plan for the Sale o Your Business
5 Steps to Creating an Excellent Exit Plan for the Sale o Your Business
One way or another, every business owner exits their business. Whether the business is sold, the ownership is transferred to a family member (or team member), or the doors close and the assets are liquidated, an exit is inevitable For this reason, an exit strategy is an essential consideration for business owners
Not only does a solid exit strategy add value to potential buyers, but it also ensures that the long term future of the business doesn’t go neglected. A thoughtful exit strategy shows that a smooth transition in the future is possible. Here are 5 steps to creating a clear and concise exit strategy for the sale of your business:
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Step 1: Create an exit vision and target sale date.
Starting with an end date in mind will clarify what needs to be done to get your business ready to sell. Begin by asking yourself a few questions to know what you want from your business and how you want it to look to prospective buyers when you’re ready to sell Here are a few questions to consider:
What are your core values?
Who do you serve?
Do you still want to be involved in the business in some form after you sell?
Who do you want to take over the business?
Are your records in order?
What are your financial goals?
Do you have a succession plan so it can operate smoothly without you at the helm?
Getting clear on your exit strategy can help you make future decisions with direction. Additionally, knowing your end goal can help you work backwards on what needs to be done to reach it.
Step 2: Determine the value of your business.
Before you start building a plan to exit your business, it’s helpful to understand what it’s worth today. Remember that this number can be improved as you continue to work on your exit strategy. This is why it’s important to get a number at the beginning of your plan, so you know where you are and what you need to work on Your CPA and a business broker can help you determine the valuation of your business and get you started in the right direction Partnering with the right business broker from the beginning can also help you clarify and properly execute your exit strategy
Step 3: Review inancials and increase the value of your business. Gathering and organizing your quality financial records is the next step in the exit strategy process Reviewing your finances can help you identify areas that need improvement Consider the following:
What can you focus on to improve the value of your business?
Do you need to focus on paying off creditors?
Where can you work to increase sales and create a diverse customer base?
Analyzing your financial performance, recurring revenue, and growth potential aids you in identifying ways to improve the value and stability of your business
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Step 4: Identify which areas are entirely dependent on your involvement.
Could your business run smoothly if you needed to step away? If the answer is no, now is a great time to start creating a contingency plan Having all the revenue tied to the owner makes a business less desirable to a buyer, so consider who will cover sales and day to day operations in your absence Creating written and documented Standard Operating Procedures (SOPs) ensures that anyone can run the business, not just the owner.
Step
5: What will you do after the exit?
The last part of the exit strategy is considering how you will support yourself once your business is sold. Will you be able to retire after the sale? Will you decide to stay on to help with the transition for the new owner? Or will you cut your ties and step away from the business? Having a plan in mind for what you’ll do after the sale of your business gives you clarity and understanding of what needs to be done before selling.
Need Help?
Creating and implementing a sound exit strategy is a vital factor to consider when selling your business. Have more questions about getting your business ready to sell? Contact us for a consultation today
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