Exit Strategy – Time

There has been much recent talk of the aging population and with it naturally comes the aging of business owners. This has led to a dramatic increase in those seeking to exit their businesses both now and over the next 12 years.

What is important to realize for business owners is that business succession planning is not about leaving it until the last possible moment and then determining the most suitable exit.

 I had a great discussion at a meeting last week about the fact that professional investors (private equity firms, angel investors, and venture capital firms) all require detailed information about the exit strategy before they enter the investment.

 As amateur investors (small business owners) we are often so concerned about the entry – funding, IT, personnel, premises, set up, marketing, etc. that we don’t have time or give thought to properly planning for the exit. 

What is vitally important therefore is that as we start to prepare for an exit we allow sufficient planning time to design the most suitable strategy and more importantly to allow us time to implement the succession plan properly.

I am seeing a number of business owners where the amount of money they require for retirement is dramatically more than the real value of their business either because they’ve never had the business value determined or because their own expectations of value are quite different. The solution is simple – time.

I am currently working with a number of clients where we have a 5-to-7-year exit horizon. This allows us to strategically design the most appropriate exit strategy and more importantly introduce a succession planning coach who will manage the implementation of that strategy over an extended period to ensure the owner can exit the business extracting the value they actually need and deserve.

Business owners who wait until they are 64 years and 9 months old and simply list the business for sale through a business broker will never extract the value they potentially should or could if the exit had been strategically planned properly.

To ensure you maximize your exit value as part of any business succession or exit plan – ensure you start the process at least five years before you expect to exit.