Business owners often procrastinate in planning their exit. However, exiting your business is inevitable, whether you walk through the door or leave it feet first. So, why hesitate to plan the unavoidable (your exit) and get your desired selling price?
There’s a big difference between exiting by chance and exiting by a plan. Why leave money on the table and exit in haste when you can set the time and terms of your exit?
Is it time to exit your business? What’s stopping you from planning to sell it?
Reasons for Exit Planning Procrastination
Generally, fear and emotion persuade business owners to postpone planning their business exit and selling their businesses.
They think exit planning can wait and are not ready for an exit. Business owners put everything they have to build their companies often think no one else can run their businesses better than they do. If they cede control, the business will fall apart. However, that is not correct. Every multinational conglomerate began as a small business. To start your business on its growth trajectory, delegate responsibility and control from a distance. As your company processes and operations develop and stabilize, slowly and gradually relinquish complete control. It will help you get ready to sell your business and make it more valuable to potential buyers.
The business defines its identity. Many business owners identify themselves by their work and are too attached to their companies. So, they’re incredibly fearful when it’s time to let go. As a business owner, you need to identify your strengths and find out where you can apply them, such as a new business venture, volunteer work, hobby, or anything else.
They’re not ready for change. Retirement can be scary for many. Think about what you will do with your free time after you depart the business. Identify your interests and hobbies and devote time to them. Find the causes you care for and the activities you enjoy doing, and utilize your time fruitfully.
They think their exit will create conflict. You fear that unpleasant conversations or decisions will foment conflict among employees, management, and family. For example, it may be difficult for the business owner to communicate that one child will take over the business and not the other. The owner fears conflict and avoids planning the exit. However, this delay hampers the successor’s chances to develop or enhance the skills needed to transition as the new owner and ultimately impacts the company’s health. Instead, confront difficult and unpleasant situations early, openly, and honestly and focus on what is best for your company.
They fear a shortfall of funds in retirement. Business owners fear the sale of their businesses will not adequately fund their retirement years. Running out of money is scary, especially when you cannot return to your business. However, proper and early exit planning ensures you get your desired exit mitigates this risk.
Procrastination Is a Big Mistake
Not taking timely steps to exit your business can have many negative consequences:
Delayed exit planning leads to hasty action. When you do not allow yourself and your company adequate time to prepare for your exit and the time to leave inevitably comes, you rush through the process. Leaving without a plan forces you to accept whatever is offered for your company, often a last-minute offer that will not be in your favor. AllowÂ yourÂ exit planning process sufficient time for proper execution. This process includes determining your company’s current market value, defining your exit goals, finding the value gap, filling it, and executing the exit transaction. Carrying out every exit planning step successfully takes time. So, if you keep putting off your exit strategy, you’ll pay the price for it when you exit.
Haste causes skipping essential steps in the process. When you rush your exit planning process, you can miss out on crucial steps that could make the difference between achieving your exit goals and exiting anyway. For example, failure to show a prospective buyer the value of your business will result in a lower offer.
Haste reduces flexibility and the ability to adapt. Even after executing the best exit plans, your company might face sudden, unexpected, internal, or external roadblocks preventing you from achieving your exit goals. Experienced exit planning advisors account for obstacles and leave room for last-minute adjustments in their exit strategy. However, you cannot make adjustments if you rush through your exit plan if there is no time buffer to accommodate them. Early exit planning affords you and your company options, flexibility, and the ability to adapt to unexpected events like sudden death, illness, economic downtown, etc.
You most likely won’t sell at the price you want. When you do not schedule enough time to implement, execute, and control the exit plan, you miss out on its most crucial step: value creation. A company’s current market value is seldom sufficient to meet the business owner’s exit goals, so there is a need for value enhancement. A delayed exit planning process allows insufficient time to carry out critical value-creation initiatives. Since your business cannot reach the optimum level required to realize the desired selling price, you leave money on the table and must accept any offer you get.
You lose opportunities to achieve personal and financial goals. As their companies form one of the most valuable assets for many business owners, their personal financial situations and their companies’ financial states are closely linked. When you exit your business, you deserve monetary, legacy, and personal benefits. However, you lose that opportunity to achieve your personal and financial goals when you delay your exit planning to the last moment.
What’s Stopping You from Starting Your Plan to Sell?
Do not allow fears or emotions to ruin your chances for a successful business exit. Your comfortable retirement depends on it. Early and accurate exit planning ensures that you get it right.
Discuss your unique situation with an experienced exit planning advisor. Planning as early as possible increases your chances for a successful and smooth exit. Planning your business exit’s never too early, but the slightest delay could cost you dearly.