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Scrambling belongs to egg making. It produces much less attractive results when it comes to selling a business. Unfortunately, far too many founders are in scramble mode when offloading their business. The reason is simple: they have not set up an exit strategy early enough.
The lack of a business exit strategy is anything but rare. A study by the Exit Planning Institute notes that about half of entrepreneurs have no exit plans. While it may be tempting to assume that they’re all just avoiding the reality of going away one day, that’s not always true. As someone who lives and breathes exit strategies, I’ve found that many founders don’t realize the numerous benefits of mapping out an exit strategy sooner or later.
In fact, 60% of owners believe that exit strategies are beneficial not only for the future of the company, but also for the owner, according to the Leaving planning institute questionnaire. Those benefits include getting the most out of sales. As a result, they may end up accepting an offer much lower than what they would have gotten had they done their research years in advance.
Another benefit of starting a business with an expected exit is that the exit will likely be smoother. After all, the trip has been “in the making” for years. This facilitates a smooth transition that leaves no one with a whiplash feeling.
Related: The Founder’s Opportunity: What Do I Want My Business to Be When It Grows Up?
It’s worth noting that a better understanding of the exit process also avoids frustration related to time frames. It can take years for a company to go through all phases of the merger and acquisition process. Many founders are surprised and stressed to discover that a departure within a year is unlikely. If they had done their homework sooner, they would have known what to expect.
Don’t worry if you count yourself among the founders who focused on pouring your heart into your company, not developing an exit strategy. There’s still time to get yourself and your business on track by implementing a few strategies:
1. Learn the ins and outs of exit strategies
Unless you’ve gone through an exit strategy process before, spend time keeping abreast of how it’s working. Read articles on everything from handling partner disputes to determining how often to go through the valuable process.
The more you learn about exit strategies, the better you’ll feel once you launch yours. Ideally, you would have at least half a decade to go before you plan to step aside, as SVA figures estimate that exits can take five to ten years. Use this start time to familiarize yourself and possibly get started with a company that will help companies in your industry choose the best business exit strategy options.
Related: Exit Planning for Modern Leaders: How to Determine the Value of Your Business
2. Project what future you will do in five years
What does the future look like for you when you think of a post-exit world? Write down your hopes and dreams. Be sure to include your financial goals as well. Yes, life can change quickly. Nevertheless, having your goals in a readable format can lead your founder’s exit strategy to a satisfying conclusion.
Remember, you don’t have to say goodbye to your business just because you’re selling it. Many founders’ exit strategies involve staying on. I work with many owners who settle into roles ranging from consultants to board members. At the same time, other customers want to flex their professional muscles elsewhere and are okay with leaving the brand they have built. Be sure you know what you need to fulfill.
3. Undergo a business valuation
You may think you won’t pull the lever of your business plan exit strategy for years to come. You still need to undergo a professional appraisal. Here’s why: Your current valuation gives you a more realistic picture of what you’d likely get if you sold your business this year. It’s much better to see a number you don’t like today because you have time to improve your rating.
Many founders have a rigid view of what they think the market will do pay for their business – yet they never did the legwork to back up their assumptions with real data. You may not feel good about what you are hearing, but it is an opportunity to make changes. Just be sure to consider all variables if you’re just trying to measure your business value. Insurance company The Hartford recommends that your valuation includes more than just financial formulas. For example, think of the impact of your geographic location.
Related: 4 Ways To Stay On After You Sell Your Business
4. Treat your company exit strategy as a living document
It’s safe to say that many companies’ exit plans had to be revised after the pandemic. Looking at the US Census Bureau’s 2020 figures, total company revenue slightly or significantly decreased during the year. And while no one wants a return to Covid days, anything can happen in a dynamic, global market.
This means you need to stay flexible when writing and executing your exit strategy. It’s better to bend a little than to be so rigid that you turn away potential buyers or create unnecessary tension. By being open to all possibilities, you are stronger and the result can be even better than you initially thought.
Exit strategy planning deserves to be preloaded. It is not a can to be kicked on the road. Instead, it is an essential part of any business. And it’s a good way to avoid those “egg on your face” moments that all founders want to avoid.