Years of control and lead often make business persons quite too overconfident on their final take about their business. Well, in case you doubt this, try surveying around, even if you have a business of your own. Try asking business leads once about what they will do to close their business properly. Or if they have prepared themselves enough. And you will most likely get to hear: what is the need even. Perhaps, something like I need not invest my time on that, for I know my business enough.
But well, the truth is: industry experts say otherwise. Experienced business owners, as well as relevant field professionals, recommend prior planning of exit strategy. It does not only promise peace of mind but also promises efficient exit by eradicating any possible flaws in the plan.
For those of you who currently find themselves struggling with the planning process, here are a few highlighted errors that you may wish to consider. Or pay additional attention to. That’s because if they somehow corrupt your way, you may find yourself ready with the wrong exit plan at the eleventh hour. So, let’s have a look into it.
Understanding an Exit Strategy
By definition, an exit strategy is a thorough strategic plan designed by a business owner or all authorized entities for smoothly selling the business. Or transferring its ownership should there ever be such a need. Some of the best-known exit strategies are as follows:
- Transferring ownership to a deserving employee
- Transferring ownership to a family member
- Selling business to open market
- Selling business to a other (competing) business
- Initial Public Offering
Although all of the above mentioned are genuine exit strategies, one cannot treat these as a generic formula of exit. Since each business has loads of proprietary specifics, you need to opt for a generic approach. And then, design a plan, modifying the approach such that it best meets your business’s mechanism. Generally, having a business exit strategy saves the business leads from unnecessary eleventh-hour hassle and grants a profitable transition.
5 Exit Strategy Missteps to Avoid
1. Neglecting Business
Even as you plan for your business exit, you need to pay full-time attention to the business itself. Your business will start losing its sale value, the day the profit graph begins fluctuating or going downhill. Hence, do not make the mistake of dismissing your team or any members of your team as you plan the exit.
Sure, it will save on some financial resources temporarily. But it will damage you in the long run. By the time you have your plan ready, your business may not be in the position to give you the maximum possible or even fair returns.
2. Losing Charge
At times, the sale process may excite you quite a bit too much. Or perhaps, years of hectic dealings may push you to lose patience at the eleventh hour. Hence, we recommend you to abide by slow and steady.
Refrain from giving exclusivity rights to your potential buyers in the early dealing process.
It may weaken your stance and give them leverage over you. Similarly, prioritize confidentiality until the very end. Only disclose the legal data and strategies to the buyers that make it to the last and final level of purchase.
3. Lack of Formal Planning
When selling your business, it is of immense importance to conduct formal planning ahead of time. The usage of formal indicates the seriousness and practicality of the plan before implementation.
The planning will grant you the options to choose when, why, and how to sell your business on your terms. You won’t have to feel pressurized by the buying party. Hence, enabling you to maximize profits as much as possible.
Formal planning comes with many other hidden pros, such as little taxes on the proceeds. When deciding the sale of the business, you can approach tax-planning entities and opportunities that allow you to retain maximum cash on transactions.
However, these policies have to become effective years in advance to yield fruitful results. So, including it in formal planning can increase your profits.
You can also maximize the profits by sorting the assets and equipment that hold more value if sold separately. Offering those things with the business deal would lower the value. So, you can sell them later.
Formal planning also provides you the opportunity to analyze the market and demands of the purchasers. By evaluation, you can enhance your business and upgrade its position in the market. Thus, the buyers find the deal attractive and satisfactory.
4. A Clouded Approach
Believe it or not, selling a business is no walk in the park. Ensuring that your business sale stays 100-percent successful is equivalent to a full-time job. Why? Well, the process involves marketing coordination, bidding, accurate information transfer, dealing with legal documents, and perhaps ID verification.
A business owner finds the entire process quite daunting and frustrating too. There are multiple things to manage while taking care of the business too. The stress caused by the management pressure can lead to imbalances in the business owner’s life. For example, being worried, the owner may experience strain in family relationships.
Hence, when planning exit strategies, it is much wiser to invest in a professional advisor or business broker who can handle the complete sale process for you.
5. Failing To Prepare Yourself For Post-Sale Life
Living a life of an entrepreneur, the sale of the business can mess up with your head once everything has become finalized. Often, owners are unaware of the reasons why they are selling their hard-earned business. To many, the sale is part of a business owner's life.
However, the thing these people do not realize is that once the business is someone else’s, you would experience a difficult time. Loss of purpose and meaning are some commonly-identified feelings in post-sale life. When left undealt, these feelings trigger bigger mental health issues, such as depression and anxiety.
Business owners struggle to lead a peaceful post-sale life if they have not planned about it beforehand.
Firstly, you need to know and understand the reason for the sale. Is it to gain financial security in old age? Is it any other financial or medical reason? Do you have to travel somewhere?
Once decided, figure the activities and interests you will like to pursue when the business is no longer yours. Perhaps, you can explore newer hobbies or start a YouTube channel. You can go to newer destinations or start a blog page about your passion. The possibilities are limitless!