Strategic Exit Planning: The Importance of Timing

When you own a business that provides a service or product, you know the importance of timing. You have probably experienced a mistimed product launch or a delayed service opportunity. With the perspective of time, you can probably look back on those “mistakes” and identify the lessons you and your team learned.

Timing also applies to the sale of your business.

Many business owners wait too long to begin their exit planning. Remember, it generally takes between 12–18 months to implement strategic exit planning inside your company. When an owner fails to create and implement a strategic exit plan, there are at least two consequences:

  • they may not receive the best value for their company; and
  • they may exit at the wrong point in time in their company’s lifecycle.

So, when is the right time to exit your company?

To create a strategic exit plan, some of the steps to remember include:

1. Speak with your business partner(s). It is essential that you are on the same page as your partners and that all decision-makers are aligned. Lack of communication and unawareness of your company’s life cycle can also be significant in the exit planning process.

2. Determine the best exit plan for yourself. Do you want to retire at a certain age? If so, planning to sell before that time is vital. In contrast, if your desire is a slow transition over three to five years, your exit plan will look dramatically different.

3. What does a successful exit look like? There are four primary considerations that business owners should determine at the beginning of the planning process:

· Value — you want to receive the most value for your company;

· Employees — your loyal employees need to be protected during and after the transition;

· Legacy — your legacy will continue after the sale; or

· Estate — you want to ensure that your estate is well planned.

Determining which of these values is the most important to you will shape how the exit will look. Your definition of success defines many smaller decisions that are involved in the exit planning process.

4. Plan for the big D’s: Death, Divorce, Disability, Disaster, and Disagreement. Planning for these life-changing events now dramatically increases your preparedness level should the need for an exit plan become immediate.

5. What is the actual value? This determination is the essence of the strategic exit planning process. Analyze the critical areas of your company from a buyer’s mindset. Ensure that a buyer will like what he sees when you offer your company for sale. This analysis will also help you pinpoint the best time to exit your company for the greatest benefit.

The Bottom Line

Start planning early. Creating a strategic exit plan cannot be left to the last minute if you wish to receive your business’s full value. Create a timeline that fits your needs and incorporates your company’s life cycle.

Consider what a buyer looks for in a prospective investment. Looking at your company through a buyer’s eyes helps you identify the areas that need improvement, upgrades, and consistent processes implanted.

The sale of your company is a process, not an event. It takes time to incorporate strategies and upgrade your company’s critical areas, determine what a successful exit looks like to you, and create a smooth transition.

It’s all part of Growth to Exit®.

To learn more about creating a strategic exit plan, please visit GrowthtoExit.com. Over 12 weeks, we teach you what a buyer looks for inside a company and the steps you can take to ensure the buyer likes what they see. Pre-sale planning is essential to a successful exit.

THIS INFORMATION IS FOR GENERAL INFORMATION ONLY. IT SHOULD NOT BE CONSIDERED LEGAL ADVICE AND DOES NOT NECESSARILY REFLECT THE OPINIONS OF TSG PUBLISHING. YOU SHOULD NOT ACT ON INFORMATION RECEIVED FROM GROWTH TO EXIT® WITHOUT FIRST SEEKING ADVICE FROM YOUR LEGAL COUNSEL.

Business Owners focus on serving their customers. Take a step back from the daily operations and become a GTE Seller to understand the value of your business.