By Kimberly Deas
Sadly 80 percent of businesses on the market do not sell (Tom West, Business Brokerage Press).
This is usually because the business owner did not prepare for their exit. They simply let time decide for them and they were forced to sell or shut down their business due to unforeseen incidents.
Given that more than 80 percent of business owners do not have a written transition plan, it is not surprising that 80 percent of businesses are not sellable, but it does not have to be that way.
By planning your exit years or even decades in advance, you will make more money along the way. You will also be able to control the process and to choose when you exit your business.
Step 1: Change your thinking.
Planning your exit starts with acknowledging you will exit your business. For many business owners, this requires a change in thinking. The old saying, “I’ll just work until I die,” sounds great and noble, but sadly life events occur that take away our control over whether we work or not.
Step 2: Set your goals.
Start with a discussion with your financial planner about what you have already for your retirement and also what you will need to retire. This is the “Gap analysis.”
Step 3: Get the business valued.
Get the business appraised to see how near or far you are to closing the “gap.” For example, if you need $2M to retire and only have $500k, then the net proceeds from the sale of the business need to be $1.5M. If the business is only valued at $500k, you have an opportunity to grow the business to meet your need.
Step 4: Set goals for revenues, profits and value.
Determine the benchmarks you need to reach to attain your target value.
Step 5: Obtain professionals to help you.
Bring in the professionals to assist with the growth process. If you are working with an exit planner or trained business transfer specialist, then they will co-ordinate working with other professionals to assist you.
Step 6: Track results and adjust as needed.
Tracking your progress with valuations and financial reviews will help assure you are on track and positioned to exit on your terms when you are ready.
It can take months or years to achieve your goals, but the sooner you start the more likely you are to be in control of when and how you exit your business.
Murphy Business & Financial Services Inc.