As a business owner, you are unique. Your situation, challenges, goals, and concerns are all specific to you and your business. When it’s time to sell your business, your exit planning process should take this into account.
An effective exit planning process will require you to create a written plan or roadmap showing where you are today and how you can achieve the life you want tomorrow. And, just as building your business has taken years, you want to make sure that you have enough time to plan for your future and the future of your business.
It's ideal to allow 3 to 5 years for this process. Here’s why…
1: You need time to determine the best business transfer option for you.
Will you transfer your business internally to family members, employees, or key managers or will you try to sell externally to an outside buyer? (You can read about all of your options here.)
To make this decision, you need time to understand the pro and cons and determine how much money you are likely to net after tax from each transfer option. You need to carefully assess the non-financial characteristics as well.
The question of whether you should sell internally or externally cannot be answered superficially. The decisions you make will affect your employees, your legacy, your family, and ultimately, your future. The suitability of each transfer option can only be determined by considering your entire situation from a holistic viewpoint. This takes time, planning, and the assistance of professionals trained in the transition planning process.
2: You need to make sure you’re prepared from a business and personal perspective.
You want to make sure you are preparing yourself for the life you have envisioned. Whether you want to remain active with your company in some capacity or wish to leave completely in a few years, you need to begin creating the life you want now.
Personal: Many owners think that life without their businesses will be great. They can’t wait—no more worries such as payroll, collecting accounts receivable, or customers to keep happy. The truth is, even though these are things most owners would be glad to leave behind, many owners’ identities are tied up in their businesses. If owners don’t give themselves the time to work through this process and prepare themselves for the transition to their next phase of life, it could lead to a feeling of emptiness and loss.
Business: What kind of shape is your business in? Are you financially healthy and profitable? Have your books been reviewed by a CPA? There are many drivers of business value beyond profits: strong management, market share, reputation, quality products and services, and documented processes and procedures. These are just a few of the things that buyers will review when they consider whether to buy your business and how much they are willing to pay. Sellers pay top dollar for high quality, and it can take years to groom your management team and prepare your business for sale.
3: You need ample time to build and execute your exit plan.
Developing your exit plan may take only a few months, but execution can take much longer. Most owners need at least a few years, once their plan is in place, to successfully transfer their business, especially if it is to an internal buyer. Five years can go by very quickly.
Ensure that your exit is successful by planning in advance! It is worth the effort.
Take the next step to ensure your future and the future of your business. Join our Expert Mastermind Group, which is launching soon and let us help you develop your plan.
You will learn from your peers and our work with more than one hundred business owners through three live 90-minute monthly calls that will include:
- Discussion of Best Practices with Q&A
- Interviews with owners who are successfully exiting their businesses
- Webinars with experts on advanced topics, such as:
- Tax Planning
- How to maximize business value
- How to minimize risks in your business
- Key employee retention strategies, and much more!
Don’t let another year go by without a plan!