Developing an exit plan from your business that will result in a profit involves establishing your business as an attractive entity for sale by preparing your business to be sold. Most businesses are focused on growing their operations but do not prepare to sell them. It is the responsibility of the entrepreneur to develop a strategy that will allow him/her to maximize his/her value when exiting his/her business, while also creating a seamless process to transfer ownership of the business.
The type of exit will include one of three types: Acquisition; Merger; Succession. The type of exit will ultimately determine how much money you will receive at closing of the transaction. Therefore, the earlier you can establish a plan to exit your business, the better.
Here are four strategies that will help you create an exit plan to ensure that you get the best possible price for your business:
1. Establish Your Business as Credible and Transparent
Buyers want to see clean financial statements, they want to know where all of your revenue comes from, and they want to understand what expenses are associated with generating this revenue.
To accomplish these objectives, you need to have:
Audited financials
Documentation that shows where your revenue comes from (i.e., customers, products/services, etc.)
Documentation of your expense structure (i.e., overhead, labor, marketing, etc.)
Having transparent financials will give the buyer confidence that your company has integrity and that your company’s value is legitimate.
2. Develop a System That Does Not Depend Solely on the Founders of the Company
Anytime a buyer sees a company that relies heavily on its founders, it creates uncertainty about the future of the business and makes the company look like a risk to the buyer.
By developing systems that delegate tasks and documenting the process, you will demonstrate to the buyer that your company has operational systems in place that will continue to run effectively even if you are no longer involved.
Developing a system that does not depend on the founders will increase the value of your company to the buyer and make it easier to sell.
3. Use Market Trends to Time the Sale of Your Business
Timing is everything when selling your business. The trend in the market will greatly affect the price you will receive for your business. Using economic trends and industry trends to guide your decision will help you time the sale of your business to obtain the highest price for your business.
Be patient and use current trends to time the sale of your business.
4. Obtain Advice from Professionals Who Are Experienced in Selling Businesses
There are many professionals who specialize in helping people sell businesses, including attorneys, accountants, and financial advisors. These professionals will provide advice on:
Structuring the sale of your business to protect your interests
Minimizing unnecessary costs or taxes associated with the sale
Negotiating the terms of the sale of your business
If you take the necessary steps to prepare your business to be sold, you will create an exit event that will result in a financial benefit to you.