Planning an exit strategy for your business

By: Bette Tomaszewicz on: March 27th, 2012 26 Comments

Far too many business owners do not realize that, as your business grows, careful strategic planning to sell your business is just as important as a business plan to launch and grow your business.

In addition to an independent lifestyle and personal fulfillment, a successful exit is the primary motivator for business ownership and entrepreneurship.

(Not to mention that a successful exit tends to improve one’s lifestyle and personal fulfillment…)

Because acquisition is the most common exit for an entrepreneur / business owner, here are nine tips to better prepare you to sell your business.

1. Don’t Wait Too Long To Sell

Many business owners wait until the last minute to try and sell their business. They wait until the business is stagnating, or they are exhausted with running the business. In fact, the best time to sell is when business is booming.

2. Take Your Time – Don’t Be in Too Much of a Hurry

If you are in too much of a hurry to sell, you will probably leave a lot of money on the table. Buyers – especially sophisticated larger corporations – will likely sense your urgency and will take advantage of it in the negotiation period.

3. Start the Process Early

It’s a good idea to begin preparing 2-4 years BEFORE the sale. It’s much more expensive and time-consuming to rush and prepare all of the necessary financial and other information in a few months than it is to consistently record and compile records over a period of years. This record-keeping is also important for your business’s growth, since it provides more perspective on your company’s performance.

4. Get Your House in Order

Make sure that you have been keeping accurate financial records and that your assets are ready for sale.  This includes both tangible assets such as equipment and inventory, as well as intangible assets such as contracts, leases, patents, trademarks, etc.  Make sure that everything is assignable to the buyer and be prepared for extensive due diligence.

5. Try to See It From the Buyer’s Point of View

A buyer’s motivations are often different than the typical business owner’s. While the entrepreneurial business owner may get excited about innovation and creative strategies, the buyer cares much more about the potential for stable revenue streams and growth potential.  Take time to understand your potential buyer’s point of view, interests, and motivations.

6. Make Yourself Less Central to the Business’s Success

The buyer wants to buy a business – not you or your job.  From the buyer’s perspective, it’s better if the current owner is not important to the success of the business.  Therefore, in planning for the sale of your business, you should begin training your management team to take over critical business functions.  If all of the key decisions revolve around you (the owner), then the value of the company will be limited without the owner – and therefore, the business is less attractive to a buyer.

7. Meanwhile, Keep Focused on Running (and Growing) Your Business

When starting the sales process, you must keep a laser-sharp focus on your business’s operations.  It’s important that you do not get too wrapped up in either the sales process or in the romance of any particular sale offer.  As difficult as this is, it’s best to act as if any deal can fall through, even if you are in the final negotiation period, because any deal can come unraveled at the last moment.  Keep your focus on growing your business until the check has cleared and is in the bank.

In addition, you should do your best to keep the sales process confidential so that you do not endanger relationships with any key clients, employees, or partners whose departure could threaten a transaction or the operations of your business.

8. Get Professional Assistance

If you are a business owner seeking to sell your business, you can benefit from outside advice and assistance.  As the old saying goes, “The attorney who represents himself has a fool for a client.”  The same applies for a business owner selling without an advisor.  Your advisor will provide you with guidance regarding valuation, due diligence, and the marketing of your business opportunity.  Without a competent advisor, you decrease your chances of selling your business at its maximum price.

9. Even if a Deal Comes, Be Prepared to Say No

If you have invested a lot of time and energy into the search, negotiation, and due diligence phases, you may be reluctant to reject any deal that comes across the table. However, just because you have a deal in front of you, you do not have to take it.  If the price is not attractive or if the deal is not right for another reason – and it cannot be mended – you may be wise to walk away and consider the next opportunity.

Sometimes, during the process of preparing their business for sale, business owners will find themselves at the helm of a much more profitable, attractive business.  If you have a profitable business, keep in mind that you have other options at your disposable.  In addition to selling your business, you can continue to grow organically, raise growth capital, and/or explore strategic partnerships.

It’s important to continually evaluate your options throughout all phases of business growth to ensure that you are making the best decisions for the long term.

Want more insider information on how to leverage marketing and sales to improve your business?  Click here to claim your special free bonus of $633.91 worth of marketing materials.

Be Sociable, Share!
    ABOUT THE AUTHOR:

    Elizabeth Tomaszewicz (Bette T.) is GKIC’s CEO. During her career, Bette has raised over $150-Million in capital, steered mergers and acquisitions, at one point led the marriage of the two largest companies in the corporate training industry. She has been at the helm of teams as large as 400 sales and service professionals with corporate revenues exceeding $330-million. She has led product innovation, sales force development, countless joint ventures and strategic alliances, global expansion and distribution/marketing channel expansion, all reflected in new initiatives. Bette has hands-on experience at the small business level, creating companies from scratch and taking companies with only a couple million dollars in revenues and growing them exponentially.

    26 Responses

    1. Kris Oakes says:

      Love the information you give and always is helpful.
      http://www.equilifemd.com and Kris Oakes

    2. Sean Greeley says:

      Congrats on the new blog guys! Great article Bette!

      Sean Greeley

    3. Great tips, Bette.

      Far too many small business owners don’t plan or act properly at all in this key area.

      Your track record of aquiring, building and selling several multi-million dollar businesses certainly makes you an expert on this process, and an outstanding role model.

      Thanks!

    4. Excellent timely tips Bette. This is not optional advice. It’s a necessity for all business owners of any size.

    5. Do this now! It is already too late to put off!

      I tell my clients to plan their exit srategy as they plan to start their business – and always be ready to sell it or sell its assets (and satisfy its debts) if conditions warrant. Thwere are too many things out of the control of a small business (or large one, for tht matter) to fail having a viable exit strategy ready to use when necessary.

      Ihis includes pre-thinking the conditions and the criteria for pulling the plug – for good reasons as well as for the bad ones — before your personal life-savings and home are gone, and your known future obligations are impossible to meet. It also includes re-planning as your business matures – just as you would review your strategies for staying and maturing in business.

      Bette has some great starting points here – but be sure that you can get out as easily as you got in. You have that fiduciary responsibility to yourself, your family, your creditores, and to any investors who funded you up front with an expectation of return on their inhvestment.

      Do great things (responsibly)!

    6. Amit Chandel says:

      Bette: Good tips is there a reference book or other material on this subject in GKIC library.

    7. Todd Skaggs says:

      Love the new look on the blog Bette. Solid info in your article that should be required reading for business owners.

    8. Great information. I find that thinking about my exit from my business in mind helps me make long-term decisions about my business. It also helps me make decisions about what features to add to my business.
      Thank you Bette. Love the blog.

    9. Xinia Trejo says:

      Thank you for sharing valuable information. As a business owner, you loose view of the 20 steps ahead, because your so involved with the two steps in front of you.

      Thank you!

    10. Loved the article. Too often small business owners forget about point 6 (making themselves less central) and ignore point 8 (get professional assistance). Even if the planned exit is something other than a sale, keeping these points in mind should make the exit smoother and maximize the options you have available.

    11. John Carter says:

      Great insight, right on point. Too many sellers fall into this trap. I find that being proactive and preparing the business for sale ensures the best return for the Seller and the best “transition” post closing for the buyer.

    12. Tom Terrence says:

      Thanks for great information, Bette!

    13. Red Denal says:

      These nine tips to better prepare you to sell your business is a great help. Not just for start up for those who have an existing one.

    14. Dan Swanson says:

      Great article Bette.

      Your point number 3 is so important. Way too many people I talk to start thinking about it the same time they want to list it.

      Another important thing to remember is to keep it a secret when you decide to pull the trigger on selling. Nothing worse than your employees, competitors or suppliers hearing that you are selling. It can often cause your best employees to leave, your competitors to spread the word that your selling out and your suppliers to put you on COD.

      • We are thinking of doing a bonus day session at the upcoming Info-Summit on this topic….what do you guys think? Perhaps “What’s Your Exit/Mergers & Acquisitions”

    15. Dan —

      I sure agree with you on Bette’s third point – early prep is essential and i tell my clients to plan their exit strategy as the plan their strt=up strategies!

      But, I am not so sure that keeping either the exit strategy – or the impending fact of their potential execution a secret is the best course.

      Consider this: careful preparation of the employees is crucial to the smoothness of any transition – another responsibility the owner has — to the employees, to the new owner, and to continuing life or ‘your baby!’

      Art – Art@AGRitter.com

    16. Tyra says:

      Hi Bette, this is actually great and the good thing about this is that the plan you’ve made from the start always has a back up plan especially this kind of marketing plan. These tips are very helpful. Thanks for sharing it! More success!

    17. Very efficiently written post. It will be supportive to anybody who usess it, including myself. Keep doing what you are doing – i will definitely read more posts.

    18. Greg says:

      I’m not sure if it’s good idea to build a business with a plan of selling it in mind, because it already presopposes that the business owner doesn’t like what he does.

      What do you think?

    19. Steve Martin says:

      Great post! I don’t think enough business owners even realize the importance of an exit strategy, much less actually think about one. Owners (like myself) get so focused on moving ahead and battling through the everyday events, the subject of moving on just doesn’t enter your head. Excellent refresher of an important part of the business cycle!

    20. Mary I’ve watched all your programmes since queen of shops & I’m always empowered by you, keep going lady you rock

    21. Daniella says:

      Interestingly, passion generates a lot of this exhaustion. Passion uses a lot of energy in all aspects and if you are the business and you drive the business, you are going to burn out far quicker than what it takes to turn your company into an asset of value

      http://www.aurik.co.za/its-time-to-sell-whats-your-exit-strategy/

    22. Inadequate preparation causes business owners to lose 30% to 40% of the potential value of their companies at the time they are sold.

      Another loss risk is failure to protect their equity asset in the case where their exit from their business is precipitated by unanticipated death or disability. This “Continuity” planning includes management succession, business interruption preparation, and cross purchase agreements – where equity owners buy insurance policies on the other shareholders so that they can buy back the equity from the deceased’s estate.

      Exiting a business is a process with multiple actions being implemented as the chosen date for departure gets closer. We have written a brief guidebook for this process – provocatively titled “Get Out Alive!”. We chose the title because business owners need a wake up call.

      If you have clients who are procrastinating about an exit plan, remind them that “The baby-boomers are coming” and they need to compete with 6 million companies that will be offered for sale in the next decade. You do them a great favor if you can get them to recognize the high financial return on time invested in an exit plan.

    23. […] this link for a free webinar on small business internet marketing Small Business Marketing StrategyYou'll probably be relieved to know that this article is not all about the technical structure of yo…Getting Rid Of The Brochure Mentality Most small business owners and entrepreneurs build a website […]

    24. Great article on exit strategy when selling a business.

    Leave a Comment