Every Business Owner Should Plan Exit Strategy

Saturday, 23 October 2010 20:55 Jacob Berenfeld

Okay, you are a business owner, or maybe you're just dreaming up your ownership. Possibly, you're one of the lucky few and managed to grow your business. Or, possibly, you're just daydreaming about it. Millions of important business issues occupy your mind. How to increase sales? How to manage expenses? How to make your marketing more effective? Etc., etc., etc...

Yet, in most cases one thing is forgotten by most business owners - Business Exit Strategy.

"What!? Why should I plan my business strategy now? I am not planning on selling the business for another 5-10 years. When time comes, I'll figure it out..."

Your business is most likely your most valuable asset. Shouldn't you be rewarded at the end for countless hours and sleepless nights you spent on growing your business?..

Regardless how you started the business, at some point you have to leave it!

There are many ways to "exit" a business:

pass it to your heirs,
sell your share to a partner or employee,
find an outside buyer,
simply close the door and leave.

Most definitely the very last option is the least desirable one. However, not surprisingly, it's the most common one. In most cases, business owners neglect planning their exit strategy assuming that at some point solution will come. Yet, nothing happens on its own. At some point business owners may loose their interest in the business, can get sick, old, incapable to manage any longer. It doesn't happen overnight. Sometimes it takes years. Depending on its subjective factors, business start slowly or rapidly decline. You may think that situation isn't that bad and you can fix it just by applying some effort... Wishful thinking! Unfortunately, it never happens! Business will keep declining to the point that it isn't worth anything and the only option you have is to close the door and leave.

Quite frequently business owners assume that their children will take over the business. In majority of cases the assumption is wrong. Children have their own life and their own plans, and don't want to take over family operation.

Selling to a partner or employee is quite a good idea, especially if you have to carry a note for the part of the purchase price, primarily because you know well that your successor is experienced operator and most likely will succeed. Yet in most cases these transactions aren't as financialy rewarding as selling to outsider; you may loose about 20% of the purchase price. If you decide to take this route, start training your successor in managing the business as early as possible.

Our California business brokers at Global Business Group face all these challenges every single day. We constantly suggest business owners to think about their business' future and help them planning the exit. Have a question about your particular situation? Contact us for a complimentary consultation. There is always an exit and experienced business brokers are probably the best advisors in these matters.

Last Updated on Friday, 17 June 2011 14:46