You have built the business you always dreamed of, and now it’s time to bask in your success. Naturally, the last thing to cross your mind is leaving your business, especially when its operations are smooth, streamlined, and at their optimum. Even if you’re not looking to exit immediately or have already planned for new management, there is no harm in being prepared for unforeseen events like ill-health, disability, divorce, or death. If such an event were to occur, all those years of hard work would come to a sudden, sad end.
All business owners must one day exit their businesses. Some will exit voluntarily, smoothly, and with high profitability. Others who procrastinate their exit planning will leave their businesses without solid backup plans, leaving their companies with no option other than cessation.
Unless business owners proactively and intentionally plan for their business departure, they will spend their careers building businesses that might fail shortly after they’re gone. This often happens with service providers such as doctors, accountants, financial planners, etc., which depend upon the business owner to provide those services. If your business depends on you for its continued existence, its sustainability and profitability are questionable.
See the following five tips if you have waited too long already and don’t know how and where to start planning your exit.
1. Find an Experienced Advisor
Letting go is not easy. Expect to feel apprehensive or a sense of loss because selling one’s business is one of the hardest and biggest things an owner can face alone. However, you don’t have to go it alone, even if you have procrastinated planning your exit. Engage the services of an experienced and qualified advisor (an attorney, CPA, financial advisor, or consultant) working in the industry to guide you through the process. You might also consider forming an advisory team to take care of the exit planning process.
You may also hire an experienced Certified Exit Planning Advisor® who is professionally trained and qualified to lead and coordinate the entire process for you. Your advisor will guide and advise you throughout the duration, from the initial data collection to implementing strategic value enhancement plans.
Since a CEPA’s primary function is to ensure your smooth exit from the business, they will do everything possible to secure your future financial security and help you achieve as many exit goals as possible.
2. Expect Obstacles
If you have waited until the last minute to study for a test, the odds of acing that test are slim. The same goes for exiting your business. You must come to terms with the fact that the company may not sell for what you originally wanted since there was no plan, to begin with.
Buyers want to know what business obligations they are expected to assume on your behalf. They want full disclosure of your business’s litigation risks, liabilities, loans, vendor contracts, property issues, intellectual property rights, etc. Buyers will conduct due diligence before proceeding with their acquisition plans, and their detailed scrutiny may reveal some unpleasant surprises.
The ideal approach is to form a competent internal advisory team to address all underperforming aspects uncovered during the audit. Although the remedial action results won’t be visible immediately, the initial planning will facilitate your eventual business exit.
3. Get a Valuation
There is no better time than now to get your business valued. Results may not be what you want, so it’s better to find out sooner than later.
Every business owner wants to reap the rewards of their hard work. And rightfully so, since you have worked diligently to build a loyal customer base and ensure a steady inflow of revenue. You understand your company’s finances, operation, processes, and market. You might also think you also have a good understanding of your company’s market value.
Managing daily operations is one thing; understanding business value involves much more than a simple profit or loss statement or annual balance sheet. An unrealistic or incomplete understanding of a company’s value means that most business owners either have a vague idea or no idea what their companies are worth. Business valuation reveals your company’s baseline value, which is the critical driver of business performance and is needed to measure the success of the value drivers.
A business valuation and appraisal will help you know the current worth of your business so that you can set realistic expectations for all value enhancement initiatives in the exit plan.
4. Train, then Delegate
You are busy managing the day-to-day business operations and already have too much to do. Do you have competent people within your company to whom you can delegate some of those tasks? Identify those people and train them to undertake those responsibilities. Here’s how:
- Identify critical positions within the company and subject matter experts.
- Identify the suitable candidates for these roles and responsibilities.
- Align the skills of those candidates with their roles.
- Plan for knowledge retention and transfer by investing in the right training programs.
- Support and demonstrate your commitment to employee development programs.
- Evaluate to monitor their performance.
Good employees are hard to find. However, business owners who understand the importance of employee contributions towards achieving business goals work consistently to create a better work culture and practice open communication.
5. Envision the Future (After Selling)
Know where you will stand with the business and what is next for you. Keep a laser-sharp focus on your business operations throughout the business sale process, as anything can go wrong.
As an entrepreneur, you will inevitably face the decision whether to decide to sell, merge, transfer, or liquidate the business. At the same time, it’s important not to get too wrapped up in the sale process or any particular offer. Your business exit goals are critical in determining your future financial needs and requirements.
Visualizing your life after selling the business will give you a good idea of what you need from the sale. Let this vision guide you through the exit planning process.
Exit planning is complex. You don’t want to miss a good exit opportunity either. So, keeping in mind the best interests of you and your company is critical for success. Team up with expert advisors to optimize your time and help you make the crucial decisions that have a meaningful impact on your life and business. An experienced, qualified team will help you choose the best options. Visit the Value Scout partner directory to find a value creation consultant who can help.