Strategic Planning: How Do You Want to Exit Your Business?
As the founder of the company, the best time to start planning your exit strategy is when your venture is launched. Any number of front-end decisions and strategies can have long-term impact on the operations. No matter whether you consider an outright sale or decide to groom another person to lead the business, think about these critical factors as you start developing your exit strategy:
Timing: When is the right time? Timing has an impact on the quantity and quality of buyers. You need to decide when the right time is based on your business life cycle. Ideally, you’ll exit when you’re on the top, not on the downward slide.
Value: What’s an objective sale value or price for your company? Business owners are often unpleasantly surprised at the low value an outside entity places on their business. Get an outside valuation so you won’t be surprised when you’re ready to exit.
Succession or sale: What’s the appropriate selection process or training sequence to prepare for a smooth transition?
Income tax: Uncle Sam’s cut can play a bigger role than you may like. Maximizing value requires reducing income taxes as much as possible. Talk to your CPA about the best way to handle income taxes.
Separate self (management) from the investment: How will you separate yourself from the value of the business? You want the investment to stand alone, without your involvement. To do all these things, you need to slowly pass clients, relationships, and responsibility to other employees in your firm.
Often, business owners have branded their last name into the business name. If that’s true for your business, figure out whether you can eliminate that tie.
Purpose beyond business: What are you going to do after the transfer? Don’t wait until after the sale or exit to answer this question. Have a plan for what you’ll do without your current daily activities.
For some of you, having a plan for after your business is sold may be easy and for others, not so much. Take care of yourself just as you’re taking care of your employees during this time of transition.