Things to Think About Before Preparing Your Business Exit Strategy

It is never too early to plan your business exit strategy, but it can be too late. Many business owners often base their business value on their own sweat equity and not what the market is willing to pay. So, rather than guess when you might be able to exit, here are several things to think about to help you start planning your exit:

1. Start With the End in Mind
When building any long-term strategy, establishing your goals should be the first thing you do.

2. Solicit Advice from Professionals
A strong set of advisors including a Financial Planner, CPA, Attorney and a Business Broker can be strong allies in helping you develop and realize your exit objectives whether they be months or years away.

3. Think Like a Buyer
View your business from a buyer's perspective. How much would you invest? How much risk is there in running or changing you business?

4. Create Strong Fundementals
Are your operations documented and well understood by all employees? Can the business survive without you? Are you growing? Yes answers are very attractive to buyers.

5. Management Execution is Key
Exit objectives like business objectives start with strategies and plans. It is important the management team buys into your business (exit) objectives and plans. Execution becomes the key to delivery.

6. Understand the Market Value of Your Business
Your business is simply worth no more or less than what someone in the marketplace is willing to pay for it. Understand what similar size businesses in your industry have sold for.

7. Understand the Present State of Financing
Banks today are reluctant to lend buyers money they do not already have. Therefore, it has become imperative that sellers finance a portion of the transaction. This can range anywhere from 20% to 60% of a deal.

8. Clean Up Your Books and Documentation
Buyers will not purchase a business if the tax returns, financial statements, bank records and bookkeeping is not aligned and easy to understand. Messy contracts and other poor Corporate records also give a buyer concern.

9. Hire a Reputable Business Broker
A good business broker is one who is not afraid to tell you the truth regarding the value and marketability of your business.