Part 1 of 4: Your Exit Strategy
Several of our clients have had the opportunity to sell their business. It’s an exciting time when someone is willing to offer you a big check for your hard work. These moments have been celebration points in the life of our clients, and we’ve been so happy to help them get there.
However, not all of our clients have sold their business when the opportunity presented itself. This is the recent case for my good friends Steve and Rachel Egner of Steve’s plumbing in Seattle Washington.
Steve and Rachel recently had an offer on their business. The offer was from a legitimate businessman with a great reputation. It was a fair offer. It reflected the hard work that Steve and Rachel have put into their business.
Yet, they said, “No.” Or at least they said, “No for now.”
You see, Steve and Rachel are not ready to sell their business. They are not ready to step away from what they’ve built over the last several decades. They still have energy and time to continue to grow the value of Steve’s Plumbing. They want the opportunity to take the next several years to create an exit strategy that’s based on their plan. That’s good. As a matter of fact it’s really smart. Having an exit strategy that’s based upon a plan is what every good business should have. Because you must accept this foundational truth of business:
You need an exit strategy!
And you do want to sell your business, don’t you?
Your answer shouldn’t be, “Maybe, if the price is right.”
Your answer should be “YES!”
Whether you are prepared or not, there will come a day when you have to exit your business. This exit can be a wonderful celebration of the hard work and years you have poured into your business. Or, it can be a sad moment when you sell your business for less than what it’s worth.
I want you to be super prepared and ready to sell your business for what it’s worth. That’s why I’ve written this 4 Part Series: How to Sell Your Business for What It’s Worth
I’m going to share with you 4 major points of consideration that you need to know before you sell your business:
- Exit Strategy
- Establishing Your Businesses Value
- Understanding the Buy-out Offers
- Evaluation Questions to Ask Yourself Before You Sell
This is an important lesson. You need to know these four major points, and you need to work through them in your own business.
Let’s begin with Part 1 of this 4 Part series. This is a quick lesson, but one that is often ignored.
Understand your exit strategy
Every business needs an exit strategy. When it comes to your exit strategy, you basically have a few choices:
#1: Sell your business for what it’s worth.
This is the ideal situation. That you minimally will receive the value of your business. Of course, you’d like to get more than what your business is worth. I rarely find that to be the case for most business owners.
#2: Sell your business for less than it’s worth.
Unfortunately, this is the norm for those that get to sell. Most businesses sell for less than what they are worth. This isn’t because business owners are being taken advantage of by ruthless buyers. On the contrary, it’s usually the fault of the business owner. They have undervalued their business by doing the following:
- Failing to build an Operational Structure that will run without the owner.
- Failing to evaluate the actual value of the business.
If a business takes the first 2 steps above, the sell value is substantially increased at the time of closing.
#3 Close shop and shutter the windows.
I hope this never happens to you. However, it is likely to if you don’t have a plan.
Let me stress this major point:
Operating without a Business Plan that includes your Exit Strategy is Planning to Fail.
This is such a hard principle for many business owners to accept. Your business is going to live on in the hands of someone else. Or, your business is going to die with you. You may think you can just leave it to your kids to operate, but unless they are trained operators this is not a plan. Nor is it a gift to your kids.
It would be like giving your 5-year-old the keys to the Super Charged GTO and saying, “Be safe!” Both scenarios are going to end in disaster.
So, if it’s going to go on without you, you should get what your business is worth when you sell.
In part 2, we are going to discuss 3 keys to Establishing Your Business’s Value. Make sure that you are subscribed to our blog to get parts 2-4.
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