In the cut and thrust of business, it's easy to get swept up in the day-to-day side of things. While that might be the case, it's crucial for business owners to pause and consider the long-term direction of their business.
One aspect that often gets overlooked but holds immense importance is succession planning and exit strategies. You got into business, but how do you get out?
These aren't just theoretical concepts reserved for large companies but are fundamental practices that can shape your future.
In this article, I’ll look at why succession planning and exit strategies matter and explore key considerations for business owners, particularly in the context of the growing trend of baby boomers seeking to sell their businesses.
Even if you have started to think about selling, it doesn’t happen overnight. I always think it is a 12-18 month timeline. That is a number I’ve arrived at simply by thinking about the folks I’ve worked with over the years that have sold their business.
Things tend to move slower than you always hope they will, decisions need to be made, you need to take advice, decide how to go to market, go to market, take part in the due diligence process and well you get the idea!
Imagine you've built a successful business from the ground up, pouring your heart and soul into every aspect of its operations. But what happens if you're suddenly unable to run it due to unforeseen circumstances, let alone decide to sell it on your own terms? Without a solid succession plan in place, things just hang in the balance.
Studies over the years suggest that the majority of business owners do not have a defined exit strategy in place. Better to be in a position to exit at a time of your doing rather than having a sale forced on you.
Timing is everything when it comes to selling your business. A well-thought-out exit strategy allows you to maximise its value and position it for a sale. Research indicates that businesses with a clearly defined exit plan tend to command higher sale prices compared to those without.
So, by planning ahead and strategically positioning your business for sale, you're not just securing your financial future but also unlocking the full potential of your hard work and dedication.
When it comes to exiting your business, there's no one-size-fits-all solution. From selling the business outright to transferring ownership through partial share sales or even mergers, there are various options to consider. With the rise of baby boomers reaching retirement age, there's a growing trend of business owners looking to sell. This demographic shift is expected to further fuel the demand for businesses on the market, presenting both challenges and opportunities for willing buyers and sellers.
By exploring different exit options and understanding their implications, you can make informed decisions that align with your goals and not get caught short. Another challenge I’m seeing more often around well-established baby boomer businesses is, who can afford to buy it. Value has been built up over the years, typically from a low base to start to a business that has significant value.
Succession and exit planning are essential components of a successful business strategy. By proactively addressing these aspects, you can manage any exit, maximise value and ensure smooth transitions for all parties involved.
So, if you haven't already, now is the time to start planning for tomorrow, today. Whether you're a seasoned business owner or just starting out, investing time and resources into succession planning and exit strategies can pay dividends in the long run.
Remember, it's never too early to start planning for the future of your business.
Lori Gardiner who was one of the hosts of the popular tv show once said, "Running a business without an exit strategy is like driving a car without brakes – you may be cruising along smoothly, but without the ability to stop and pivot when needed, you're setting yourself up for a potential crash. Always be ready for sale, because you never know when opportunity will knock."
