Your Business Exit Plan Starts Now
Friday, November 12, 2010
In today’s economy, most business owners are probably too preoccupied about making ends meet, paying off credit, and keeping the business afloat that the idea of exiting from the business might sound like a stretch. The fear of selling at a time of economic uncertainty is also another factor; business owners are wary of risking the sale value of their company which could be significantly diminished by the amount of credit available to prospective buyers. In this case, simply settling on a price is a grim option. More than ever, savvy business owners want to maximize their company’s sale value. But it is also true that planning your exit from your business as early as now is very important.
Gary T. Brooks, the CEO of ExitPlanPros, a company that helps business owners grow their business while planning their exit, breaks down in six steps how to prepare for an exit plan*:
- Five Years Before the Projected Sale: Take stock of both your business and your personal financial goals and current situation. Once you set a timeline to guide when you want to exit your business, make the commitment to create a business Exit Plan. Even better, list particular tasks you need to accomplish to reach your projected goals within the timeline you have made.
- Four Years Before the Projected Sale: Start working on a few key strategic actions that will help grow your business well before you are ready to transfer ownership. Decrease your company’s dependence on a small number of customers and vendors. Your business will command a higher price if you can show positive growth and can diversify your client and supplier base.
- Three Years Before the Projected Sale: Have an audit done by a reputable accountant, who can review the financial statements of your business and subsidiaries. If you can show audited financials to a prospective buyer, they will feel more secure about pursuing the sale. Many lenders now require audited statements, and in some cases (such as public companies) a minimum of three years of statements are required.
- Two Years Before the Projected Sale: Begin the implementation of your Succession Plan. Be sure you have established a stable and viable management team that, in your absence, will be able to handle company operations successfully. If your customers and suppliers are encouraged to interact more with your management team and less with you personally, it will stabilize future transfer of ownership and allow you to get free of day to day operations when you are ready to. Your future buyers will be looking to see whether the business is overly dependent on you, the owner, for its success.
- One Year Before the Projected Sale: Clean up your financials. Most buyers will want to see your business financial statements on an EBITDA basis. Perform a detailed review of the structure of your corporation and any personal financial structures (including trusts and wills). This can help your professional Exit Plan advisers as they strategize to minimize the tax consequences of the sale.
- Right Now: Assemble your advisery team to guide your actions as you plan your business exit. You will need legal, accounting, tax, and investment advice, and you shouldn’t scrimp on finding advisers with extensive experience in acquisitions and mergers. Your current advisery team may do well with the day to day business tasks, but you want to be confident that they can help you transition out of your business as smoothly and profitably as possible.
Part of your preparation must include the valuation of your business. This means consulting with professional business appraisers who can guide you towards an optimal understanding of how much your business is worth, based on a complex and academically-validated method with industry-specific valuation factors.
eBusiness Appraisals‘ experts have over two decades of advising and deal-making experience in the buying and selling of businesses that determining the fair and appropriate value of a business would be a natural outcome of that process.
We can help you appraise your business and consult with you in the areas of opportunity and growth of your business during the valuation period.
To know more about business valuation and how we can help with your exit strategy, contact us at 800-706-1322 or sign up here and one of our professionals will assist you.
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