A successful business exit can be a complex and daunting process. There are many factors to consider, such as the value of the business, the best way to sell it, and how to ensure a smooth transition. That’s why it’s essential for business owners to consider following these three major steps.
- Hiring Advisors
One of the best things a business owner can do when planning an exit is to hire advisors. These advisors can provide valuable guidance and expertise on all aspects of the exit process, from valuation to marketing to legal matters. They can also help the business owner to avoid making costly mistakes.
There are many different types of advisors that a business owner may need to hire, depending on the specific circumstances of the exit. Some common types to consider include:
- Business brokers: Business brokers are experts in selling businesses. They can help the business owner market the business to potential buyers and to negotiate the sale price.
- Financial advisors: Financial advisors can help the business owner assess the value of the business and develop a financial plan for the exit.
- Attorneys: Attorneys can help the business owner navigate the legal aspects of the exit, such as drafting contracts and negotiating agreements.
- Getting a Business Valuation
Another essential step in planning a successful business exit is to get a business valuation. This will help the business owner to determine the value of the business and set a realistic sales price. There are many different methods for valuing a business, and the best method will vary depending on the specific circumstances of the business.
- Creating a Business Continuity Plan
When a business owner is planning to exit, it’s important to have a business continuity plan in place. This plan will help to ensure that the business can continue to operate smoothly even after the owner’s departure.
The business continuity plan should include a detailed description of the business’s operations, as well as a list of key employees and their responsibilities. The plan should also include steps for transferring ownership of the business, as well as a plan for dealing with any unexpected events that may occur after the owner’s departure.
I worked with a client that started their business from scratch over 30 years ago. He brought in a management team to handle the day-to-day operations of sales, client delivery, and finance. When it came time to sell the business, he brought in someone to give a business valuation. He also worked with his CPA to fully understand all the accounting aspects of the transaction and outsourced corporate counsel to address legal documents like the letter of intent, purchase and sale agreement, as well as to negotiate the legal deal points between buyer and seller. In the end, the transaction took about six months with a lot of negotiation between buyer and seller. But the deal closed and both sides were very happy with the outcome.
By taking these steps, business owners can increase their chances of selling their businesses for a fair price and ensuring a smooth transition. A few other things to keep in mind for a successful exit:
- Start planning early. The earlier a business owner starts planning for an exit, the more time they will have to get everything in order.
- Be transparent with employees. Employees should be informed of the business owner’s plans to exit the business as soon as possible. This will help to minimize any disruption to the business and ensure that employees are treated fairly.
- Market the business effectively. The business owner should market the business to potential buyers in a way that highlights the business’s strengths and potential. Typically, the business broker or M&A advisor handles this piece.
- Be prepared to negotiate. The business owner should be prepared to negotiate with potential buyers on the sale price and other terms of the sale. Often the attorneys will handle legal points. But buyer and seller may negotiate business points that aren’t legal in nature.
Keeping these steps in mind will help create a smooth exit and put you on the road towards financial freedom.
