You only have one shot to sell your business, which is why it’s absolutely vital to develop a succession plan or exit strategy. Yet most business owners have no exit plan which can often result in disappointment. In fact, three of four owners profoundly regret their decision to sell within 12 months of the sale. Here are four ways business owners can achieve a successful exit.
Three of four owners profoundly regret their decision to sell within 12 months of the sale.
Frame your priorities
Succession planning is about prioritizing what’s important to you – knowing what you want and determining your personal and financial priorities for life after ownership. Is your goal to maximize value, or is it to ensure your business maintains the culture? Do you want a lump sum when you walk out the door, or do you want to stick around for a few years and ease out slowly? Clear priorities will help you make better decisions about what you want out of the sale.
Know your exit avenues
Because you don’t know what you don’t know, it’s important to become familiar with all options. The landscape for potential buyers includes:
- Second or third generation family members involved in the business
- Employees or a management team looking to buy into the business
- Outside buyers
- Strategic buyers, a company that wants to add a product line or service to their mix
- Financial buyers, namely private equity
It’s prudent to know all options even when a sales avenue is presumed, because priorities sometimes change for all parties involved. With well-defined options, you’ll get a better read on the best avenue to pursue. And that will set you on a course to prepare and position the company for a specific buyer.
Control the process
With a plan, you control what your retirement situation or next move in life looks like. A proper succession plan allows you to sell to who you want, how you want, and when you want, in order to achieve your personal and financial post-exit goals. Not doing so means you’re letting the marketplace, your health, your age or other external factors control your exit, which can negatively impact your personal and financial goals.
A proper succession plan allows you to sell to who you want, when you want, and how you want.
The sooner you start, the more options you’ll have.
Get succession planning help
Most don’t think of their bank when planning their exit, often turning only to accounting and legal advisors. But adding a bank to the mix is worth consideration. A bank with the right chops can see the market and important trends, and is well-equipped to help guide the process from framing priorities, to pinpointing the best exit avenues, to building a strategy that aligns with your goals. And it does it through an impartial lens.
Park Bank hosted a panel to discuss this very topic, and one of our customers gave attendees a crash course on selling a business. Watch a local entrepreneur share his lessons learned.
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