Exit your business step-by-step

 

It is easy to understand why some business owners do not take the time to map out an exit strategy.   Time demands and pressures of most start-up and day-to-day operations makes planning your departure seem impractical. 

The rewards are high when you plan in advance.  With an effective plan business owners will likely get more for their business and they are more likely to have a successful transfer.  Planning will help with minimizing the tax consequences and will dramatically improve the likelihood of future success for the business.  Plus, planning helps protect owners from the things they don’t expect and preserves personal wealth, estate and the business before a transfer is made.

There are a variety of exit strategies as unique and personal as the assortment of different businesses and business owners.  

A good starting point is to begin with the end in mind.

Start by painting a realistic picture of your long term income needs and retirement goals.  A business owner must be able to determine how much money the sale of the business must generate in order to retire.  Similarly, a personal snap shot of the owner’s vision for future legacy and role of the business within the family will help determine how you stage things for the next owner.

Every business owner needs to know there finish-line or departure date.  Is it age 55, 60 or 65?  Conversely, is it a dollar value of your business’ sale price?  Or, most typically, is it some combination of both?  Business owners need to set their finish-line, it needs to be written down and visible. Whether it is an age limit or income needed from the sale of the business or both, business owners who set their goals are more likely to achieving them.

Finally, and perhaps most difficult, business owners need to prepare themselves for life after their business transfer.  Building a business is hard work and an emotional endeavor.  It’s common for business owners to grieve the loss of purpose and stature that running a company can bring.  For many the financial wealth and security they have created can mask what really mattered most, the fundamental desire to build, problem solve and challenge themselves.

The overall exit plan can seem like a daunting project which is why many fail to begin.  Breaking the process into smaller manageable parts establishes realistic goals and objectives.  Plus, it will keep you focused on what is really important.  

Now that you have established where you want to be, you’re ready for the next step.

Building an exit plan should begin the day you start your business, however, it’s never too late to start! 

Do you have a small business question you would like answered about this article or others?

Bill Sivell is a salesperson with VR Windsor Inc. [www.vrwindsor.com] 519-903-7807, which sells businesses to buyers across Canada and around the world. His 14-year career includes diverse senior management positions in marketing, advertising, sales management and operations management. His blog appears every Tuesday.