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The scrambling belongs to the preparation of eggs. It produces much less attractive results when it comes to selling a business. Unfortunately, many founders find themselves in scramble mode when offloading their business. The reason is simple: they did not establish an exit strategy soon enough
The lack of a business exit strategy is anything but rare. A study by the Departure Planning Institute notes that about half of employers have no exit plans. While it may be tempting to assume that they are all avoiding the reality of leaving one day, this is not always true. As someone who lives and breathes exit strategies, I’ve found that many founders don’t realize the many benefits of mapping out an exit strategy sooner rather than later.
In fact, 60% of owners believe that exit strategies are beneficial not only for the future of the business, but also for the owner. according to the Exit Planning Institute poll. These benefits include getting the most out of the sale. As a result, they may end up accepting a much lower offer than they could have gotten if they had done their research years earlier.
Another advantage of starting a business with a planned exit is that the exit is likely to be smoother. After all, the trip has been “in the making” for years. This makes for a streamlined transition that doesn’t leave anyone feeling rushed.
Related: The Founder’s Opportunity: What do I want my company to be when it grows?
It’s worth mentioning that having a better understanding of the checkout process also avoids frustration related to deadlines. It can take years for a company to go through all the stages of the M&A process. Many founders are surprised and stressed when they learn that exiting within a year is unlikely. If they had done their homework beforehand, they would have known what to expect.
Don’t worry if you’re among the founders who have focused on pouring their hearts into your company, not on developing an exit strategy. You still have time to get started and for your business by implementing some strategies:
1. Learn the ins and outs of exit strategies
Unless you’ve been through an exit strategy process before, spend some time getting up to speed on how it works. Read articles on everything from managing partner disputes to determining how often to undergo the valuable process.
The more you learn about exit strategies, the better off you’ll feel once you launch yours. Ideally, you should have at least half a decade to pass before you plan to step aside, as SVA figures estimate that exits can take between five and ten years. Use this track time to familiarize yourself with and potentially start working with a company that helps companies in your industry choose the best business exit strategy options.
Related: Exit Planning for Modern Leaders: How to Determine Your Company’s Value
2. Project what future you will make in five years
What does the future look like to you when you think about a post-exit world? Write down your hopes and dreams. Be sure to include your financial goals as well. Yes, life can change quickly. However, having your goals in a readable format can propel your founder’s exit strategy to a successful conclusion.
Remember, you don’t have to say goodbye to your business just because you’re selling it. Many founders’ business exit strategies involve them staying. I work with many owners who settle into roles ranging from consultants to board members. At the same time, other clients want to flex their professional muscles elsewhere and are okay with letting go of the brand they’ve built. Just make sure you know what you need to comply with.
3. Submit to a business assessment
You may think you won’t pull the trigger on your business plan’s exit strategy for years and years. You still need to undergo a professional assessment. Here’s why: Your current valuation will give you a more realistic understanding of what you’re likely to get if you sell your business this year. Seeing a number you don’t like today is much better, because you have time to improve your rating.
Many founders have a starry-eyed vision of what they assume the market will pay for their business, but have never done the work to back up their assumptions with real data. You may not feel good about what you hear, but it’s an opportunity to make changes. Just be sure to consider all the variables if you’re trying to measure the value of your solo business. The insurance company, The Hartford, recommends that your appraisal include more than financial formulas. For example, consider the impact of your geographic location.
Related: 4 Ways to Sustain After Selling Your Business
4. Treat your exit strategy as a living document
It’s safe to say that many companies’ exit plans had to be revised after the pandemic. Looking at 2020 numbers from the US Census Bureau, overall business sales declined slightly or significantly for the year. And while no one wants to return to the days of Covid, anything can happen in a dynamic global market.
This means you need to stay flexible when writing and executing your exit strategy. It’s better to bend a little than be so rigid that you end up turning off potential buyers or causing undue tension. Keeping an open mind to all possibilities puts you on a firmer footing and can lead to an even better outcome than you initially imagined.
Exit strategy planning deserves an initial charge. It’s not a can to be kicked out by the way. Instead, it is a vital part of any business. And it’s a great way to avoid those “egg on your face” moments that all founders want to avoid.