This is why founders should plan their exit strategy for the business now, even if they aren’t leaving soon.
Egg-making includes scrambling. When it comes time to sell a business, scrambling produces less appealing results. Too many founders are left in a scramble mode when it comes to selling their business. It’s simple: They didn’t have an exit strategy in place early enough.
A business exit strategy is rare. According to the Exit Planning Institute, half of business owners do not have an exit strategy. Although it may seem like they are all trying to avoid the reality of one-day leaving, this is not always true. I have seen firsthand the many benefits of a well-planned exit strategy. As someone who lives and breathes it, I have found that many founders fail to see the many benefits.
According to an Exit Planning Institute survey, 60% of owners believe exit strategies can be beneficial not only for the future of their business, but also for them personally. These benefits include getting the best out of the sale. They may accept a lower bid than they would have received if they had done their research years in advance.
One advantage of starting a business with an exit plan is that it will be easier to exit. The journey has been in the making for many years. This allows for a smooth transition that doesn’t leave anyone feeling like they are in whiplash.
It is important to mention that having a better understanding about the exit process can help avoid frustrations related to timeframes. A business can take many years to complete all phases of the mergers or acquisitions process. Many founders feel shocked and stressed when they discover that it is not possible to exit within one year. They would have been able to anticipate what was coming if they had done their research sooner.
Do not be afraid if you are one of the founders who have put their heart and soul into building their company, rather than worrying about how to exit. You still have time to help your company get on the right track. Here are some strategies you can use.
Table of Contents
1. Learn all about exit strategies
If you have never been through an exit strategy process, take some time to learn about it. You can find articles about everything, from how to handle partner disputes to when to go through the process.
You’ll feel more confident when you launch your exit strategy. You should aim to have at least half a decade before you decide to step down. According to SVA figures, exits can take anywhere from five to ten years. This runway time can be used to get familiar with yourself and possibly start working for a firm that assists businesses in your industry in choosing the best exit strategy.
2. In five years, imagine what your future will look like
How does the future look for you if you consider a post-exit world. Write down your dreams and hopes. Include your financial goals, too. Yes, life can change quickly. However, it is important to clearly define your goals so that your founder can create a successful exit strategy.
You don’t have the obligation to leave your company because it is being sold. Many founders opt to stay on in their business exit plans. Many owners settle down in roles that range from board members to consultants. Other clients are willing to leave the brand they have built and want to expand their professional skills. Be sure to know exactly what you want.
3. Do a business valuation
Perhaps you are afraid that you won’t be able to pull the lever on your exit strategy business plan for many years. A professional valuation is still a good idea. This is why you should still have a professional valuation. It will help you get a better understanding of the likely value of your company if it were to be sold this year. It’s better to see a number that you don’t like right now, as you have the time to improve your valuation.
Many founders are blind to the fact that they have an unrealistic view of the market’s potential price for their business. However, they never did the research necessary to verify their assumptions with actual data. Although you may not like what you hear it is an opportunity to change. If you are trying to determine your business’ value alone, it is important to take into account all factors. The Hartford insurance company recommends that you include more than just financial formulas in your valuation. Consider the impact of your geographical location on your valuation.
4. Your exit strategy for your business should be considered a living document.
Many businesses had to revise their exit plans after the pandemic. The U.S. Census Bureau’s 2020 figures show that overall business sales fell somewhat or significantly in the past year. Even though everyone wants to see Covid again, there are still opportunities for change in a global market.
You must be flexible when planning and executing your exit strategy. It is better to let go of rigidity than to turn off potential buyers or cause undue tension. You may be able to achieve a better outcome by keeping an open mind and being open to all possibilities.
Planning for exit strategy should be done in advance. This is not something that can be thrown down the road. It’s an integral part of every business. It’s also a great way to avoid those “egg on the face” moments founders hate to have to deal with.
