As a small business owner, you may feel more pressure than ever to have an exit strategy.
Planning your exit strategy is crucial with the COVID-19 pandemic affecting many small businesses. By developing exit strategies early, you can ensure your business remains viable and competitive.
At this point, you may be wondering the following: What IS exit planning? How do I even begin?
Here are some key considerations:
When most business owners think about exit planning, they think about retirement. But exit planning is much more than that. It’s a comprehensive process that helps business owners identify and execute the best possible strategies for an exit.
This might involve selling the business, passing it on to family members, or taking it public. Exit planning helps to ensure that the company can continue to thrive after the owner is gone.
Exit planning involves identifying key stakeholders, developing a transition plan, and creating a financial roadmap. It’s a complex process, but it can ensure a smooth transition for any business. There are many different ways to exit a business, and these include selling or passing down ownership, closing the company altogether, or transitioning leadership to a trusted colleague.
Consider all of your exit strategy options and weigh the pros and cons of each. Bonus points if you sit down with trusted advisors to help you understand your options.
Think about what success looks like at every stage of your exit plan because it may look different at every step. Whether developing a new skill set, marketing your business, building a sales pipeline, or gearing up to retire, set yourself up for success at every stage of your exit plan.
With the COVID-19 pandemic continuing to cause disruption and uncertainty, now is the time to start thinking about your options for the future.
Most owners will give up control or sell their company. The majority of business owners who are faced with the prospect of selling express it as changing gears on a fast-moving vehicle. They have no alternative, which leads to severe consequences. How do you put your small company exit plan in place?
There are a few things to consider when crafting your exit strategy during these challenging times. First, you need to decide if you want to sell your business or pass it down to family or employees. If you’re considering selling, you’ll need to think about what type of buyer you’re looking for and what price you’re willing to accept. Please don’t believe that because there’s a financial crisis, now is the worst time to learn about it.
When everyone is scrambling for the exits, it’s time to buy.
- When markets fall, look for undervalued assets to get your hands on. Opportunities don’t present themselves often, and seizing them requires planning and insight.
- A recession is a period of economic decline that may be crucial for merger and acquisition activity. Taking a stand on a failing company might pay off later.
- The goal of an acquisition is to implement corporate strategy and improve the core business’s strength.
The deterioration of the US equities market over the next two years from COVID-19 will become a burden for company owners.
It’s essential to plan for the future, not just in terms of what it will look like but also how you’ll get there. Prepare for the future by looking into your current and potential customers and market trends and trends affecting them. You hope that your business increases in value each year so that when it comes time to sell, you can retire comfortably.
So, what is the worth of your business? A company valuation may assist you in ensuring that you are on track to meet personal and professional objectives. And even if you’re not ready to sell yet – wouldn’t it be nice to know how much your business is worth as it is? The value of a business is an essential element in ensuring a successful retirement and proper estate planning. Understanding the value ensures that the owner’s family and company are safeguarded. Your company is your most valuable asset, just like any financial investment account or home, and you must have a clear picture of its worth to evaluate it properly.
Are you a baby boomer or expecting to retire soon? This one’s for you.
You could be thinking that a child, family member, or employee will take over the business when you’re gone. Do you know that they can do it? Do you know whether or not they want to do it? Most importantly, can they afford it? Setting these exit strategies in stone will undoubtedly put your mind at ease, as we’ve seen, because a crisis can strike at any time, and your small business may change dramatically. In our 25 years as a consulting company, generational transfers in family businesses aren’t always successful. Alternatively, a buyer may lack the financial resources to acquire a business. Set this plan in motion, so you’re ready to address it when the time comes.
Change is difficult and frightening. It’s tough to pivot in the face of uncertainty and business downtime. It’s especially tough if the business was unexpectedly hit and you can’t see what’s next. Stress and worry may be deadly for a company owner. It’s critical to determine what is best for you and the company as a business owner. It’s wonderful when these two objectives are in sync. But, there are times when what is suitable for the company owner might not be best for the business or vice versa. It’s tough for company owners to plan the future when operating on “what ifs” and instincts. Business owners must remain dedicated to developing their most important asset – their business. This is important whether they intend to exit soon or in the next ten years.
We emphasize obtaining an accurate, numeric value for your company, otherwise known as a valuation.
It’s the elephant in the room that no one wants to discuss. What if my company isn’t valued at what I believe? What if all this time and effort I’ve put in over the years doesn’t add quantifiable value? It may be frightening, but this isn’t the time to hide from your fears – this is when you must face them head-on.
The only way to be sure and alter your company’s fortunes is to begin, and yes – you can do it. It’s time to develop an exit strategy, whether you’ve been in business for two years or twenty. Exit planning early on will save you a lot of future headaches.
No matter what exit strategy you choose, it’s essential to have a plan to make the best decision for your business and your family. With careful planning and consideration, you can ensure that your small business will thrive long into the future.
Contact us for help with exit planning!
Read more on valuations here.
