Why You Should Focus on Proper Exit Planning
If you are like many business owners, you are primarily focusing on building your business. Unless you want to work until you drop, you should start thinking about what you’ll need to do to sell your business. Many businesses can take years to sell or even fail to sell all together. For this and many other reasons, it is important to invest some time and energy into thinking about proper exit planning and strategies.
In a recent Forbes article, “How Proper Exit Planning Benefits the Buyer and Seller,” author Walter Deibel discusses his interview with John H. Brown, author of Exit Planning: The Definitive Guide. Brown and Deibel both agreed that, when properly handled, exit planning can help both the seller and the buyer. Deibel is the author of “Buy Then Build: How Acquisition Entrepreneurs Outsmart the Startup Game.”
Exit planning can make a business more transferable. As Deibel points out, when buyers are evaluating businesses, transferability is a key factor.
“Once the current business owner leaves, are they taking a lot of specialized knowledge with them that the buyer will need to grow the business?” asked Deibel. A buyer must feel that he or she can walk into a business, take it over, keep it running effectively and even grow the business in the future.
A key aspect of being able to buy a business and having that business be successful is that all relationships from vendors to customers are transferable. A good management team, one that can help a new owner thrive, is a must. Building that team in advance is a savvy move for any business owner looking to sell their business. Concerns on any of these fronts can spell doom for a seller. If a buyer doesn’t feel that they can operate a business, then they probably shouldn’t be buying it.
Great exit planning definitely benefits the seller as well. When sellers engage in exit planning, they realize how much money they need in order to exit, Deibel notes. This forces sellers to become very focused and goal-oriented. Sellers will take proactive steps to ensure that their business is as appealing to a potential buyer as possible.
“Exit planning is not about squeezing every last drop of value from the business or taking all the growth opportunity off the table,” Deibel says. That “end gaming” approach to exit planning can discourage potential buyers.
Ultimately, proper exit planning is a win-win, one that benefits both buyer and seller. “When done correctly, exit planning gives the seller clarity, lowers the risk for the buyer and leaves the door open for future growth,” Deibel says.
Buying or selling a business is a multifaceted, and often quite complex, process. The sooner you begin working with a professional, like a business broker, the better off you’ll be in finding the right business for you and your particular needs. For most people, buying or selling a business is the financial decision of a lifetime. Having a proven trusted partner, one that knows the lay of the land, is simply invaluable.