It’s helpful to figure out what your exit strategy might be before you actually get serious about starting your business so that you can plan accordingly. It’s important you aren’t forced into a situation where you don’t want to be later down the road when it comes time to sell.
There are many factors to consider, but these five steps will get you started:
Remember, your plan may need to change as you progress in your business. The one thing you shouldn’t do is wait until it’s too late to start planning. If you want to reach your goals and move on, start planning now.
For some business owners, selling their business is a purely financial decision. Perhaps you are looking to retire and want to cash out of your business so that you can live off of that money. For others, it may be more emotional. Perhaps you’ve built up your company from nothing over a number of years and now have employees who mean a lot to you personally.
Regardless of your motivation, you need to have a clear reason why you want to sell your business before you actually do so. The reason may change as time goes on and circumstances in your company change, but having one will ensure that when those opportunities do arise, you’ll know what it is that you are looking for.
If you plan early, you will feel less stressed about the future of your business. To come up with an exit strategy, ask yourself these questions:
Do your due diligence to set yourself up for a smooth transition. Seek out mentors who have been through the process before so that they can provide advice and guidance. Consider writing down everything related to your business that you would need if someone were taking over. Get rid of any personal items that may not be transferred to a new owner or are sentimental but not valuable.
Do you want to sell your business?
To consider the sale, you should assess whether or not it will be profitable. If it is not profitable and you have bills to pay, it may be best to sell your business in the short term. Another option is an Initial Public Offering (IPO) where you can turn over ownership of the company for long-term profits and cash flow. It is important to understand what kind of arrangements you’ll need to make. Once this process has been decided on, put together a timeline listing dates by which each task needs to be completed.
One example of a timeline would be to determine dates for the following:
Selling your business will likely require a proper assessment of assets, as well as consultation with an attorney. When planning, you should consult with an attorney who specializes in your industry to find out how they can help facilitate your strategy. To keep things simple, many lawyers are happy to do an initial consultation via phone or email to discuss any questions you may have about starting a business exit plan.
Lastly, prepare the necessary documents to make it easier for everyone during negotiations. As a record of fairness in case negotiations fail, these documents will help make a case, so it’s vital to get them right!
Determine what milestones are most important in your plan and map out what you’ll need to do. To help keep yourself organized, you might want to create an exit checklist with the tasks you need to complete.
Be clear about goals – When it comes to mapping out your business exit strategy, clarity is key. What will success look like? What type of growth is acceptable? How much money will be needed? And how long should it take?
Do some research on different types of exits before deciding which one would work best for you. You can’t predict how your business will change, but you can prepare yourself with foresight, data, and a well-defined game plan. Develop multiple exit strategies – While having an ultimate goal is smart, it isn’t always realistic or even preferable. A lot can happen in between starting a business and selling it or taking it public.