Guide To Developing a Business Exit Strategy
It is important to develop a well-thought-out business exit strategy if you consider selling your business. First, you must identify what prompted you to sell your business. Your intentions to sell will directly impact the outcome of the sale. You are more likely to make costly errors if you don't understand why you are selling.
Assess Your Motivations and Preferences
The first step in selling your business is determining what motivates you. Be open and honest. Selling a business isn't just about money.
Are you ready to retire?
If your business is dependent on its current location, are you willing to relocate?
Are you looking to diversify your portfolio?
Are you bored, or are you burned out?
A strong motivator for a quick sale is a serious illness, death in the family, or owner burnout. In these cases, the owner might be willing to sell at a lower price than the first qualified buyer.
A Lower Price Can be Associated with an Immediate Exit
You can lose the chance to increase the appeal of your offer if you move too fast. You may also reduce or eliminate the opportunity for a transition period. This could lead to a lower offer. You may need to sell immediately due to financial hardships or other urgent circumstances. However, seller financing is often available, supporting a higher selling price.
Planning ahead of time is more likely to yield a higher sale price.
However, some business owners plan to exit their business at a slower pace. They may want to retire early and take out some of the risks of selling. They may also be trying to raise capital for a new venture. In these cases, the owner may be more willing to spend the time to prepare their business for sale and then wait for the right person to buy it. These owners are more flexible and will finance a portion or all of the sale. Although the process can take a while, it is more likely that a qualified buyer will be available to purchase the business at a higher price.
Define Your After-Sale Interests
Are you worried about the future success of your business?
Are you ready to sell the business?
Are you interested in being a consultant or part owner?
Are there people you would rather not sell to?
While everyone wants to get the best price for their business, many sellers worry about the company's future. Some people want to be gone forever, while others are keen to remain involved as part-owners, contract employees, or consultants to the new owners. Is it important for you, the seller, that your business stays in its current location to minimize disruption to clients and staff? Do you have a key competitor to whom you would prefer to sell your business? Do you have a family member or key employee that you would prefer to sell your company?
The Motivations of Sellers have a direct impact on the outcome of the sale
Motives of sellers can have an impact on their terms and expectations. Prospective buyers are quick to inquire why the seller is selling. This will influence how buyers structure their offers. You can determine the variables that will influence your business exit strategy by understanding your motivations and the most interesting outcomes.
Identify Potential Conflicts and Solve Them
After you have examined your motivations and the desired outcome of your sale, there are likely to be some conflicts. For example, while you may desire an all-cash sale, you may also want to get a high price. It is possible to want a high price but minimal disruption to your existing business. Possible conflicts of priorities can jeopardize your business's sales.
Create a prioritized list of your priorities and formulate a sales strategy
Business brokers can assist sellers in resolving conflicts and developing a sales strategy. They can also help them achieve the best outcome. A pre-sale plan is one way to resolve many of these issues. Pre-sale preparation can help owners assess their business more accurately and prepare them for the market to get the highest possible price.
