Some business owners are in it for life—the thought of selling their business isn’t something they’re willing to consider.
Other business owners are ready to start the next chapter in their professional lives, and this often means selling the company.
If you’re ready to let go of your company, you need to start business exit planning. In other words, you don’t want to suddenly decide to sell your company without an effective exit strategy.
So, how do you create a strategy that ensures you receive a suitable compensation amount and leave your business in capable hands?
The Three Parts of Business Exit Planning
Before you start finalizing the sale of your business or even searching for potential buyers, it’s a good idea to ask yourself a simple question.
Are you ready to exit your business?
To answer this question, it helps to create a three-part plan, which includes business, financial, and personal planning.
Your business plan should address questions like what needs to happen to prepare your company for the sale.
Are you satisfied with its value and performance or do improvements need to be made?
What about business risks?
When was the last time you evaluated any potential risks?
This is a question most potential buyers will ask.
Financial planning addresses your wealth goals.
How much do you need to make off of the business sale to support your lifestyle?
This also ties into the third aspect of the initial exit plan.
Are you ready for what comes next in your life? Are you planning on starting a new business or maybe retiring?
You don’t want to sell your business only to realize you’re feeling a little lost.
Steps for Creating a Successful Business Exit Plan
Okay, your business value and performance metrics are making you happy and you have both a financial and personal plan.
This may mean you’re ready to start creating an effective business exit plan.
Remember, your exit plan should have little to no impact on your company.
The goal is for everything to go smoothly with very little disruption to daily operations.
Understand the Value of Your Business
The value of your business is more than looking at gross and net profits—and yes, this is a part of your business’s value but it doesn’t tell the whole story.
Your business’s value is composed of multiple factors that often include the total assets, current and projected earnings, along with any liabilities.
The industry can also impact value—for example, the value of your business may be less than you forecast in a small niche market.
The same can also apply to companies in established markets with plenty of competitors.
List Your Gaps
Every business has gaps and most owners and CEOs are working diligently to meet goals.
You may not be able to close all of the gaps before the sale, but your exit strategy should at least address them.
What are some common business gaps?
This can be a profit, value, or wealth gap.
After identifying the gaps, you can start taking steps for the next owner to more easily start meeting their goals.
What you don’t want to do is try and hide any gaps; it may not necessarily be illegal but it’s usually considered unethical to do.
If you’re planning on starting another business, what you do now can determine the success of your next venture.
Create a Risk Management Strategy
All businesses have inherent risks. What matters is how you minimize and mitigate these risks.
Having an effective risk management strategy is an essential part of a business exit plan, which also means communicating the strategy to your staff.
Don’t leave them in the dark.
Your team is responsible for implementing the procedures and they need to have more than a passing familiarity with the processes.
You should also plan on letting the new owners know about your risk management strategy.
Chances are they’ll make changes but it will simplify the process.
Be Familiar with Your Options
Selling your business is a big deal, and not only financially.
You’re willingly stepping back from something you created and letting someone else take over, as it can be a jarring experience to go through, especially on the first day after the sale.
Suddenly, you’re no longer heading into your old, familiar office.
Take a minute to look over all of your options before putting your exit plan into action.
Make sure you’ve accomplished your goals and it’s the right time for you to move on.
If you decide selling your business is the right move, get ready to enjoy a new chapter in your life.
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