As a business owner, you are usually occupied with the current needs of your company. However, a time will come when you’ll consider selling or transferring your business to embrace a well-earned retirement. But the importance of exit planning strategies well before you ever intend to sell cannot be understated.
Exit strategies for business owners are more than just having a rough outline of what will happen to your business when you’re ready to hand over the reins. Furthermore, it’s a complex process that requires an exit planning advisor to ensure that your financial future is secure no matter what happens between now and then.
Most small businesses – up to 75% according to some reports – do not have a plan for when and how they will exit their business, and their bottom line will suffer. So, as you conduct daily operations, don’t wait until a significant change in circumstances to make these all-important exit strategy decisions. Instead, start planning to reap the most benefits when it’s time for a major change.
What is an Exit Strategy?
Simply stated, an exit strategy is a business’ thought-out and detailed plan to sell their company to investors, another company or owner, or a third-party entity once they are ready to retire or change circumstances. The exit strategy outlines how the company will be sold (or how an owner’s stake will be reduced). Additionally, it enables an entrepreneur to limit losses if the business is unsuccessful or maximize profits if the venture is a success.
What are the Benefits of Having an Exit Strategy?
There are many benefits when it comes to having an exit strategy in place, which can boost your business when it’s time to change course, as well as right now.
A sample of these benefits includes the following:
Provide a Blueprint for the Future
With a goal in mind, you will have a better idea of the changes, adjustments, and ambitions to conquer now to reach your ultimate vision. As a result, you’ll likely have more success in the immediate future, as well as in the long term.
In addition to securing the future of your business, you’ll also have an opportunity to start planning for your retirement or next venture. With a timeline in place (even one that fluctuates), you will have a much clearer picture of the following steps and how you will get there.
Help You Understand Your Company’s Value
You may have a rough idea of how much your company is worth. However, an exit strategy will fill in the blanks and provide extensive details on your value now as well as in the years ahead. From your equipment and properties to the intangible assets and future predictions, an exit strategy provides insight into how much your business is worth.
Assists You to Navigate Unsolicited Offers
According to a study by the National Center for the Middle Market, 45% of all business sales are an opportunity for the buyer, not the seller. Having an exit strategy helps you recognize these opportunistic offers. It also helps you field attractive unsolicited offers from ones where the buyer is getting the better deal.
Your Business Will Become More Attractive to Buyers
Smart buyers looking for opportunities appreciate business owners with an exit strategy in place, as it demonstrates that the seller is committed, smart, and has researched their company’s value. This, in turn, can lead to multiple offers, a higher selling price, and a streamlined closing free of excessive delays and complications.
You’ll Be Better at Negotiating
In addition to attracting more buyers, you’ll have a strong bargaining chip in your corner, as you’ll have a clear idea of what your business is worth and why. Being able to come to the negotiating table confident in your value and exit strategy will go a long way to ensuring you get the best deal possible when it’s time to sell.
Discover Exit Planning Strategies with Saddock Advisory
At Saddock Advisory, we’ve helped clients through all life stages of their business, and that includes having a plan in place for when it’s time to move on to the next adventure. As you reflect on the future, remember that timely preparation and a clear vision will set you and your business for lasting financial success.
Reach out to our experienced team today to start a conversation about how to shape an exit strategy for your company. Let’s get a jump start on a plan that will ensure you and your business are well-prepared for whatever the future brings.