For most owners, selling their business is an unpleasant task. It is unknown territory and navigating unknown territory requires additional concentration. Unlike familiar territory it requires your full attention all the time.Another, perhaps even more significant reason it is so hard, could be that it has become a manifestation of unfulfilled dreams and hopes. The life in affluence you imagined turned out to be long hours and family sacrifices. The hobby you once loved became a chore. You have mouths to feed so you hang in there year after year. Even though it is uncomfortable, status quo feels safer than action.
You may seek comfort in an illusion that you have created tremendous value and if you just hang in there long enough things will turn around. You may hold on to this belief until the day the bubble bursts and you are forced to face the truth that your business is just a job like any other job. You are burned out. Maybe your health has taken a toll. Maybe your family life is in shatters and this is what forces you to face the music. Your business is worthless. Who is going to want to buy a job?
When you have arrived at a dark place like that, it is very difficult to muster the energy and enthusiasm it takes to let go of a business that has robbed you of your sweat and tears but given back almost nothing.
It is for this reason exit planning really needs to start the day you open for business. If you start the business from the point of view that you started it to sell it, not to have something to do, not to become wealthy, not to have flexibility in your life or any of the other reasons people give why they wanted to start their own business, then, selling it becomes a day of celebration, the day you reach your goal, the day you cash in.
Three Step Exit Planning
Exit planning starts with setting goals, first for yourself, then for your family and then for anyone else you consider stakeholders in your business.
Getting Yourself Ready
What does a life of joy look like to you? The simple task of establishing that in your own mind could give you a whole new perspective and purpose in life. Of course, no one lives in a vacuum. Our lives are connected with other people around us. How does your dreams align with theirs? Do you have to or are you willing to make any concessions? You may want to live in the country. Your spouse and kids are all city dwellers. How do you reconcile that? You may have employees. How does your departure affect them? Do you care?
Getting Your Business Ready
The second step is to get your business ready. Can it run without you? Why would you want your business to run without you? It may not be important from day one while you are still in building mode, but when the day of selling comes around, independence from you becomes vital. If it cannot exist without you, its only value is in its assets. Therefore, your job is to create transferable value. This means creating a management team, establishing systems and processes and many other things that build value.
Getting Your Buyer Ready
The third step is getting the buyer ready. You may think this is not really your responsibility, but you would be wrong. The more you understand about who the buyer is, what makes him or her happy, the smoother the transition. Once you have vetted and selected a serious buyer, you will go through a time of due diligence. Since you are a stranger to the buyer, he or she is going to verify that the business is as valuable as you say it is. Does it meet her expectations? The better you can understand and anticipate her requirements, the better she will feel. We are not talking about putting lipstick on a pig, but providing actual useful information to support your claims about the business. Many things can go wrong during this time. It is during this time price adjustments may be made and they always make you upset or kill your deal altogether. To avoid that, have good and verifiable documentation ready to counter every argument. Your job is to make it an easy and stress free experience for the buyer. Then, it will be pleasant and stress free for you as well.
Conclusion
If you started your business for the wrong reason, all may not be lost. Barring an emergency exit, every step you can take well in advance will bring you closer to your goal.
See also:
Built to Sell: Creating a Business That Can Thrive Without You by John Warrillow (28-Feb-2013) PaperbackWhen you build your business from day one to sell it instead of to have a job, letting go of it becomes a whole lot easier. It can become downright enjoyable.
Even if you have just realized that selling it could become more challenging that you thought, all may not be lost. There may still be time to build value so you can go do what you really wanted to do in the first place.
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