The New Year is now upon us, bringing with it the opportunity for new beginnings and the desire to plan ahead for the future…
Many people have already begun making small steps in their journey towards fulfilling their New Year’s resolutions and it should be no different for business owners. Make 2020 the year to start considering how and when you would like to plan and execute your business exit.
In our experience, business owners need to start thinking and planning their exit 3-5 years in advance if they want to achieve the most successful exit. With the holidays behind us and a fresh calendar year ahead, now is a great time to consider the following three steps that will help you commence your exit planning process:
Establish Clear Exit Goals and Objectives
It’s important to begin establishing your exit goals and objectives sooner rather than later. This is so you can start putting plans in place to attain those goals and then persevere to see the plans through to completion. These exit objectives don’t need to be a detailed thesis; simply put pen to paper and begin jotting down a few notes. Below are a couple of questions you might want to consider asking yourself:
What is the desired amount you need to maintain your lifestyle? Think about your monthly expenses and work backwards to figure out the minimum amount that is needed to fund your lifestyle or future goals.
What does an ideal transaction look like? Do you want to sell 100% of your sharesand ride off into the sunset? Or would you like to stay involved in the business for a number of years and then hand it over?
Who is your ideal buyer? You should identify your ideal buyer profile (competitors, family, employees etc) and develop a list of actions that you can implement to improve the attractiveness of the business to these specific groups.
Speak to a Trusted Advisor
When you started your business, it was not with a written plan but with an idea of building something great. Similarly, exit planning begins when you start to think about all the great things that await you after you have moved on from business ownership. So tell a trusted advisor whose opinion you value and trust about your exit plans and the objectives you have established. The biggest benefit of doing this is it creates a powerful catalyst for change and makes the process very real. This person may be your lawyer, accountant or mentor. Get their thoughts on how realistic your objectives are. They may know of another professional who can help you in the process.
Get a Business Valuation
If you haven’t done so already, seek a professional to help you appraise and value your business. This is vital to help you identify how much your business is worth by providing hard financials that will give you a better understanding of where your business is at, as well as your options with regard to how you will execute your exit. For example, if your business is both growing and popular, you are likely to have a better prospect of selling it for a higher price. Therefore, business valuations are a great way to reveal your company’s strengths, weaknesses and opportunities for growth.