Exit planning for small business owners is essential to achieve long term success for any enterprise.
Did you know that, eventually, you will exit your business? Most of us are so busy starting and building our businesses and putting all of our energy into creating and developing products and services. Why on earth would we want to plan our exit when we’re at the beginning or growing our business?
How will I Exit my business?
This is really an important question. As a small business owner, you would probably exit your business in three ways. 1) Sell your business 2) Transfer it to a family member 3) Close the business. There are other options, but these are the most common.
Will I get cash when I exit my business?
The following are your options:
If you close your business, you get $0 for the asset.
If you sell the business, you could get an amount that the buyer feels is reasonable to take over
If you transfer the business to a family member, you could get a value that is negotiated by the
family and that family member.
Cash vs. No Cash: wouldn’t it be better to get some cash out of the sale of this asset that you’ve spent time developing?
Start Early: If you’ve decided that you want to get a sales amount for the business when you exit, the earlier you start to plan this, the better. 3-5 years beforehand is ideal. (Pro Tip: you should be planning your exit when you start your business, but we’ll leave that for another article.)
Start off thinking about the Exit Time: What value do you need to get for your business? Do you need to get $1.5 million so that you can retire well? Do you need to get $2 million so that you can buy the next business that you’re going to run? What is your objective for selling your business?
If your business is currently worth $1 Million and you could sell it for $1.5 million with a little planning and development, would it be worth it for you?
These are questions that you should ask yourself.
It’s all about building and then packaging your business for sale.
The objective here is to package your business so that the future owner will understand what you’re doing and say to themselves, “I like this business. I see myself being successful with operating it.”
Finally, let’s talk about getting you, the owner, out of business. Probably the most challenging part of this whole thing is to get you, the owner, to exit the business. Many owners say to themselves, “I am the only one who can do the work because I’ve built it, and I’m experienced in it.” Here we need to picture the owner out of business and the operations being run by somebody else.
There are a host of things to think about and plan for: The points to remember from this article are the following:
1) You are eventually going to exit your business – 100% guaranteed
2) It’s best to get cash value from the sale of the business
3) The hardest part might be getting the owner out of the business
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