As another holiday season comes to an end, we’ve hopefully filled our cups with gratitude and taken some time to appreciate our last 365-day journey around the sun. For me, the holidays are always a time of deep reflection on the life I’ve built with lessons from my earliest teacher.
My father was a Polish immigrant who taught me the importance of patience and saving from an early age. A proud entrepreneur, he built a successful Brooklyn-based garment company over his lifetime, which served as a bedrock in our community and provided for our family. Yet, like many entrepreneurs who fall victim to unforeseen circumstances, he was forced to liquidate the business he had painstakingly built from the ground up when the industry changed and the work went overseas. Although painful, his story is why I’m passionate about helping other business owners prepare for their exits.
While most professionals agree that the more time you have to plan your exit (some say five to seven years; I prefer 10), the more successful it will be. In this article, I’ll focus on the big-picture questions that business owners must reflect on to achieve their goals and prepare for the next phase of life.
Related: I Specialize in Exit Planning — You Need to Make These 5 Moves Before Selling Your Business
1. What was it all for?
In the end, we always look back at the beginning. What was the impetus for starting a business besides providing a living wage? Many of my clients list the ability to be their own boss, have flexibility and freedom in their schedules and grow generational wealth as primary drivers.
It’s time to apply that same vision to retirement. Individuals are increasingly electing to continue working for social and mental health benefits. Taking a temperature check as the 10-year timeline begins to see how you feel about retaining any form of involvement in the company is an intelligent way to steer the overall exit strategy.
2. Does my business have a clean bill of health?
Sometimes, we have rose-colored glasses when estimating our individual and business health. Now is the time to be realistic in the name of longevity for both. Performing a SWOT analysis (Strengths, Weaknesses, Opportunities, Threats) can be particularly helpful in understanding your business’s current market position, financial standings and growth potential.
When you find weaknesses, look for ways to plug the holes. Could you spend the next few years diversifying your revenue or introducing new offerings? Where can technology support operational efficiency? According to a McKinsey report, businesses that adopt advanced analytics can improve their EBITDA by up to 25%.
Investing in the health of your business (like you should your personal health) can make the difference between your business’ legacy or demise.
Related: How Much Time Do I Need to Sell My Business? First, Consider These 7 Factors.
3. What offer can I not refuse?
Like selling a home, selling a business can be deeply personal, so due diligence will go a long way in negotiating a fair deal that accounts for the decades of sweat equity.
Obtaining a professional valuation will help you understand a realistic price and the factors buyers consider when evaluating a business. Hire an investment banker who can attract the right buyers or identify competitors who might also be interested in buying the business. Creating a detailed selling memorandum that highlights the strengths of your business, its financial performance and growth potential will also be essential for marketing your business to potential buyers. Marketing the business with professional support behind it is a surefire way to help bring offers to the table.
4. Who can help me navigate the process?
Building a solid team is both an internal and external endeavor. Creating a succession plan that outlines how the business will operate post-sale and identifies the key individuals who can grow into the role can take many years to get right. Identify the roles and responsibilities of the new management team who will replace the current one and how they will transition under new ownership.
You’ll also need an external team of professionals to guide you. Select knowledgeable advisors, including an accountant, Certified Exit Planning Advisor (CEPA), financial advisor, business attorney and estate attorney, to help guide you through the sale process and all the personal preparations. Pro tip: look for a financial advisor with their CEPA designation. Once you identify that person, they can recommend an attorney. These individuals will be critical to help you navigate negotiations, legalities, closing the deal and advice on how to potentially reduce taxes and plan for the financial goals you have for the rest of your life.
Take time to interview teams and develop future talent now for a smooth exit in the years ahead.
Related: Don’t Fall For These Tricks: 5 Things You Shouldn’t Do When Selling a Business
Don’t let fear paralyze you
As an entrepreneur, you have likely spent your life growing your business into something incredibly special. Moving on can be fraught with emotion and concern about keeping those years of hard work intact and fruitful. But don’t let fear paralyze you and prevent you from having a plan. Mapping out your strategy is critical to giving yourself the chance of enhancing your business’ value and finding the right buyer. Keep the above four questions front and center, and you’ll be well on your way to a rewarding exit from your business. If you can take anything from my father’s experience — hindsight is always 20/20.
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