Selling a business – planning starts with knowledge of your “why”
Selling a business is the best way to exit your business and the planning starts years before. As a business owner, you need to begin a learning journey. The more educated you are, the better your plan and the better the outcomes.
You must understand the ‘why’ of your exit plan.
The exit and succession plan for each business owner will be different for a myriad of reasons, including individual personal wealth and health circumstances, a person’s outlook on life, family circumstances and the type of the business.
Below are some typical transition pathways that include forced and non-forced exit events.
Non-forced events (Favourable)
- An offer ‘too good to refuse’ is made to buy the business
- The business owner wants to transition into retirement
- The business owner wants to transfer ownership to family members
- The business owner has been offered a job or opportunity elsewhere and wants to move onto a new era of his/ her life
- The business owner uses the sale as a means of risk mitigation, i.e. cashing in whilst the going is good…before markets change, new competitors enter the marketplace, or circumstances change.
Forced events (Unfavourable)
- The business owner has a lack of passion or motivation to continue
- The business is causing the business owner headaches and stress and he/she just wants out
- The business model is breaking down and sales and profits are going south
- The business owner does not have access to enough capital or resources to compete effectively moving forward.
- The business is failing or even going into liquidation
- The unexpected events such as marriage breakdown, death, sickness or disability.
If we plan for these forced and non-forced events, we are going to have a far better chance of creating maximum value in the business and looking after our personal welfare and wealth as we transition.
It will also help us to manage our exit in case of unexpected events such as divorce, disability or even death. The key points of your exit plan should be included in your Business Plan.
Author: Kathleen Dale, Business Advisor and Founder of Compass Business Advisory.
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