It’s best to have an exit plan formed long before you decide to sell your business. However, many business owners don’t think to establish one until they’re ready to leave. If you want to create a clear path for your future, keep reading to learn about what goes into smart business exit planning.
Who Needs an Exit Plan?
Anyone who owns a business should have an exit plan! Regardless of the type or size of your business or how long you’ve been in ownership, it’s crucial. Business exit planning is especially important for small business owners who have a large portion of their net worth tied up in their business and for those who want to start a new venture in the future.
You may be caught up in its day-to-day operations now, but you’ll inevitably move on from your business someday. Even if you have no immediate plans to exit your business, having an exit plan can provide peace of mind, knowing that you’re prepared for any unexpected circumstances that may arise.
How to Plan an Exit Strategy for a Business: 5 Steps
Whether you plan to pass it on to a family member, sell to a third-party buyer, or retire, having a well-thought-out exit plan is essential. Not sure how to plan an exit strategy for a business? Here are five steps you’ll likely take when forming your plan.
1. Set Objectives
It’s easy to get sidetracked and make decisions that aren’t aligned with your ultimate goals if you don’t have a clear set of objectives. Defining your objectives will help you stay focused, provide a roadmap for your exit strategy, and ensure you’re taking the right steps to achieve your desired outcome. Remember that your objectives may change over time, so you’ll want to regularly review and update your exit strategy as needed.
2. Assess Finances
Organizing your finances and having a sound understanding of your expenses and assets will help you make informed decisions about the timing of your exit and the best type of exit strategy to use. It will also help you identify potential roadblocks more easily and give potential buyers a clear idea of your business’s financial health.
3. Value Your Business
A professional business valuation will give you a realistic picture of your business’s worth and allow you to set a fair price when it’s time to list your business for sale. It can also help you identify areas to improve business value.
4. Choose Strategy Type
There’s more than one type of exit plan, so it’s essential to consider all your options. The best fit will depend on how you envision your life after your exit and how your business does or doesn’t fit into it.
5. Find an M&A Advisor
While not all exit plans require a business broker, hiring one is the way to go if you want to save time, money, and stress and ensure your strategy is the smartest it can be. A broker can also help you with other important steps in the sale process, like finding potential buyers, negotiating sale terms, and more.
Are you ready to sell your business? SBB Capital Partners has a team of experienced advisors that can guide you from start to close to help you.
John Davies
John is the Founder of SBB Capital Partners. In addition to SBB Capital Partners, he also founded a platform investment company which has subsequently acquired 20 additional small cap public and private companies. He has decades of experience as both a buyer and seller of middle market businesses, and as a business intermediary.
Check out these great insights
The Importance of Timing in Selling Your Business: 4 Factors to Consider
Timing is everything when it comes to most major decisions in life, and selling a business is no exception.
Election Year Uncertainty: How the 2024 Election is Impacting M&A Deals
Explore how election year uncertainty impacts business valuations, deal structures, and the timing of selling a business.
3 Risks and Rewards of Distressed M&A Opportunities
Distressed M&A presents a high-risk, high-reward opportunity for companies and investors willing to take on the challenges.
