Not all owners have a happy lucrative exit from their business. Many people have the dream that they will start their business, grow it and sell it for a huge sum – then take that money and ride off into the sunset.
The dream of sailing off on a yacht and retiring on a beach is not a reality for all business owners.
When you are planning your exit from your company, you have to decide if there are factors pushing you away from your business or pulling you to other things.
Common Push Factors
-Reaching retirement age
-Feeling as if you have reached the top of your business
-Loss of interest
-Business is no longer challenging
Common Pull Factors
-Travel the world
-Start another business
-Spend more time with friends and family
-Would like to relocate
When you have compelling reasons on both sides, it is much better.
The first business I owned was a chocolate store called Truffles Darling. I bought that business while I was in University.
When I bought the store, I thought it was a given that once I was ready to move on to something else or the next chapter in my life, I would just sell it to a buyer. So Simple (at least it was in my mind).
The reality was that when it came time to exit the business we did not have an action plan. There were not a stream of buyers lined up to buy my business. I did not have an exit plan.
The Value of Your Business
The ultimate judge of the value of your business and what it’s worth- is the market itself.
No matter what you think your company is worth or how much you need – it is the market that determines the value of your business. Not the business owner or the emotional feelings that you have about your business.
To determine what your business is worth; you have to answer the question – What is your business worth to you? Be clear on your motivation for selling.
If your goal in exiting your business is to retire, you will want to make sure you will make enough once you sell it. You will also want to be sure that you are selling it at the right time to create an income stream that you can live on into your retirement.
If retirement is your motivation; ask yourself the following questions:
- How much do you need to live on per month?
- What lifestyle do you plan to have?
- Are you planning to travel the world?
- Are you planning to golf in different countries?
- Or are you planning to stay in your hometown and volunteer with different charities
Another reason some business owners decide to exit their business is because they are bored. They often find that they are no longer being challenged. At this point they are sometimes looking at investing in another venture that would be more challenging.
If this is the case, you may want to sell your business quickly and in some cases be willing to take a discount. First, you will need to figure out your minimum number that you want to be paid for the time you have invested in your business.
Most owners wanting to make a quick exit out of boredom or the desire to do something else- will be happy to make sure they get enough cash compensation for their business to cover what they have invested to date.
Options to consider when exiting your business
- Transfer to a family member
This is where succession planning is very important. Identifying and developing the best family members who can replace you is very important. Is there someone who is experienced or interesting in taking over your business? Family-owners may also expect succession plans to favour family members instead of outsiders.
Non-family owner-employees are interested in the longevity of the business and keeping employed, but may not make decisions that align with family values or direction. Finally the family owner-employees, who are often founding members, will need to choose between what is good for the family, the business, and other owners.
This is a process that has to start earlier than needed.
- Sell the business completely
If you are in an industry where the market has peaked and there is a lot of competition, or your business is unprofitable, it may be best to sell the business outright.
As a general rule, you stand to earn more money from the sale of your business the more willing you are to participate in a transition period,
- Would like to do something else
If you would like to transition into another business, you can hire a business manager or sell off some of your shares to so that you use the funds to finance your new venture.
- Health reasons
If you are considering exiting your business because of health reasons, you may want to liquidate it completely. Of course you can consider some of the other options mentioned above, such as succession planning- transferring the business to a family member, or a management buy out.
Have you exited your business? What was your reason? Comment below.