It’s one of the most important decisions you will make. And the hardest. Is it time for you to ‘exit stage left’ and say goodbye to or sell the business? There are a few unmistakable signs that it is indeed the right time – for you and the business – to move on.
A successful run and natural progression, like retirement, may be the impetus for your exit. It may be that all the goals you identified in your succession plan and exit strategy have been met. In which case, you’ve prepared for this moment and you’re likely ready.
Or perhaps you’ve done such a bang-up job that the needs of the business have outgrown what you can reasonably provide. Time for someone else to take the helm.
But you could also be encountering one of these reasons:
- You’re no longer having fun
- Your business growth has stalled, you’re out of ideas and oomph
- You have come to despise the hiring and firing and paperwork
- You’re frazzled, stressed and your health is suffering
- There’s conflict (or divorce) between partners
- Not enough working capital to continue, or
- The death of a business partner has forced your hand.
But just because it is the right time for you to sell the business doesn’t mean it’s the right time. Both the business and the market environment should also be in the right space.
When you’re having a tough time in your business, your business can be unhappy and unhealthy too. Before you make your exit move, your business should be in great shape, with:
- Strong sales and performing products & services
- A competent management team
- Well-defined, repeatable and documented processes
- Demonstrable history of profitability
- Solid customer base, and
- A plan for continued growth.
It may seem counterintuitive, but the best time to sell your business is likely when it is doing better than it ever has before.
Market conditions, technology and the regulatory environment can all affect your business and your exit strategy. Some questions to ask:
- How many other businesses are for sale in your area or market? Too many – a buyer’s market – and it may drive down your price and make it harder to attract a buyer.
- What’s happening with the economy: is the lending environment such that prospective buyers will be unable to access financing? Has there been a swath of corporate downsizings increasing the number of potential new business owners looking for their next career move?
- Are there regulatory changes on the horizon that will affect your business in either a positive or negative way?
- Is new or developing technology going to be a threat or an advantage?
Preparing to Exit
Whether your plan is to transfer, merge or sell the business, there are key activities to undertake to ensure you’re prepared and to position your business to command top dollar.
- Boost profits: All of a sudden your tax strategy will shift. Rather than low profits to reduce tax payable, when you’re readying your business to sell you want to leave as much money in the business as possible. Prospective buyers will want to see strong financial performance and profits.
- Clean house: Polish up the balance sheet, ensure all taxes payable are up to date, discontinue products or services that aren’t doing well, review and prune any fringe benefits that are overly generous, and be sure you have a couple of years worth of audited financial statements.
- Work with an advisor: You’ll want someone with experience in your industry and with the exit strategy you’re employing. They – along with your accountant – should also be able to help you with a business valuation that will establish a reasonable price tag for your business.
If your business is in decline and not valuable enough for someone else to acquire, you may simply decide to liquidate inventory and close your doors. Regardless, how and when to exit the business is a significant decision that deserves careful thought and planning.
Originally published by Troy Media.