What is your EXIT strategy?

Stephen Covey stated, “Think with the end in mind.”

Many business owners are so excited and overwhelmed that they often overlook a big part of their business, operating plan.  Their exit plans.

You may finally figure your target market. Your USP (Unique Selling Proposition). Your business structure and much more, but you have not figured out how it all ends.

Here are the most common ways to end a business:

  • Your business dies. You must shut the doors. Usually due to lack of cash.
  • You die in your business-literally.  Do you have will set up on what will happen with the business when that day comes?
  • You get bought out. You worked hard over the years. Put a lot of blood, sweat and tears into your business, now you want to enjoy the fruits of your labor. Do you have a plan to sell? Is your business sellable?
  • You buy a business and they assume control of the merged company. Nice, what are you going to do next?
  • You pass it to a family member (legacy). Most family members do not want YOUR business. The ones that do, it may turn into a legal battleground.
  • You voluntarily shut it down. Could be due to some internal or external situation, but usually must happen rapidly and the outcome is usually not too good.

The sale or transition of a business will likely be the single largest and most important financial transaction of a business owner’s life………and its level of success will impact the rest of their life in retirement.

Mapping out a successful plan to exit the business can help business owners:

  • Avoid unnecessary or excessive taxes.
  • Minimize risk during the transition.
  • Realize the full value for their life’s work.
  • In recent years only 20 to 30% of businesses listed for sale ended up being sold. Many of them did not sell for what the owners initially thought they were worth.
  • The failure to plan and manage succession well is the greatest threat to the survival of a family business:
    • 41% of family businesses plan to pass ownership and management of their business to the next generation in the family
    • Yet…only 30% of family businesses last into the 2nd generation, only 12% into the 3rd generation and only 3% into the 4th generation and beyond. (Family Firm Institute)

The key to exit planning is that it isn’t actually about the exit itself. It’s about the planning for the exit. The staging process that leads to a happy ending for the business owner, bringing them maximum value for the business when it’s sold.

Here are some exit statistics:

  • Most business are owned by nearing retirement baby boomers 63% of all businesses. The youngest are now 56.
  • 80-90% of their wealth is tied up in their businesses. They have NO retirement plan.
  • 75% plan to transition over the next 10 years; 48% in the next 5 years.
  • Represents a transfer of 4,500,000 businesses and over $10 trillion of wealth.
  • 78% have no exit strategy team on board.

How successful are we at transitioning businesses?

  • 12 months after selling, 3 out of 4 business owners surveyed “profoundly regretted” the decision. (Price Waterhouse)
  • 70-80% of businesses put on the market don’t sell. (Business Reference Guide, T. West)
  • 95% of M&A professionals believe a business owners unrealistic expectations of company value are the biggest obstacle to sale or transfer. (AM&AA)
  • Private companies are not generating returns on investment greater than their costs of capital. (Private Capital Markets Study, Rob Slee)

A successful business exit strategy includes 5 key ingredients:

  1. A written exit plan, and related documentation, based on the owner’s objectives.
    1. A team of professional advisors to each help with their areas of expertise (Business Coach, Attorney, CPA/Accountant, Financial Advisor, Banker, Insurance Advisor, Business Broker, etc.)
    1. Positive cash flow in the business and determining a quantified business value.
    1. A strong management team.
    1. Enough time to prepare for a successful exit (typically planning 3-5 years, minimum, in advance of an exit…the more time prior to the owner’s planned retirement age, the better)

Are you prepared to exit?

How are you planning on exiting your business?

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Steve Feld, MBA, Certified Business Coach, Author, provides training and business performance coaching to business owners, professionals and executives. Steve also speaks to organizations, conducts workshops and training.  Focusing on the lead generation and revenue creation to get growth results for the business.

Contact Biz Coach Steve today to see how he can assist you get the results you want in your business, steve@bizcoachsteve.com, or www.bizcoachsteve.com. He is in the business of growing businesses. Need a speaker, contact Steve today. #bizcoachstevef #entrepreneur #smallbusiness #business #smallbiz #coaching #businessowner #businesscoach #leadership #marketing #speaking #keynotespeaker #meetingprofs #eventprofs #meetingstoday