Smart Exit Planning

Smart exit planning is about maximizing business value, being financially prepared, and ensuring you have an after-exit strategy. Whether your business is growing, reached maturity, declining, or even closed, there is much you can do to maximize value and achieve a more favorable outcome. Your exit plan has a direct influence on the transition of your business.

No doubt, you're probably wondering, 'How much is my business worth?' There are several rules of thumb for determining business value. You can also find a business broker and get a formal valuation. In any case, you'll discover you must first evaluate certain key aspects of your business, including key financials, physical assets, and goodwill or intangible assets.

1. Identify weaknesses and areas in need of improvement.

As you evaluate your business, you'll begin creating your pre-sale to-do list, including areas in need of improvement and key strengths that may help attract buyers. Your goal is to find ways to improve the value and salability of your business. Think about what a buyer might ask to examine when determining whether or not your business is a good purchase prospect. Buyers are typically attracted to businesses with low risk and opportunities for growth. For a more in-depth look at how buyers evaluate businesses for say, download the BizBuySell Guide to Selling Your Small Business.

2. Review your financials and create your value-add improvement strategy.

You may be surprised with the opportunities where your business has value. Now is the time to discover ways to increase the value of your business. Even if your business has been declining or is closed, it may have valuable real estate in a prime location, or even valuable equipment, saving buyers time and money of an expensive build-out. If it's a restaurant, retail or service business, this is your opportunity to enhance it with a strong digital presence showing its upside potential through e-commerce. Digital usage has accelerated dramatically in recent years and more customers are expecting businesses to offer some sort of virtual or online service.

3. Consider what you'll be doing after the business is sold.

Many business owners have spent years relying on their monthly revenue to support their lifestyle, pay their mortgage and put their kids through college. Consider how you will support yourself once the business is sold. If you sell the business now, will the proceeds give you enough money for retirement? Now is the time to increase the value of your business to receive an optimum price when it's sold. Also, consider the future of your business. Perhaps now is the time to think of any relatives or key employees who might be interested in taking over the business. You may decide you'd like to stay on as an employee or as a consultant to the new owner. Or, you may want to leave once and for all.

Whether you choose to sell your business now or to make the necessary improvements to attract more prospective buyers, having an exit plan is a great way to assess the condition of your business and create an action plan going forward. After all, it always pays to be prepared. Just when you least expect it, you may be approached with an offer to buy your business.