While it might seem premature, the best time to start up your exit plan is a soon as your business starts making a profit.
There are two categories of situations in which you would want to sell your business:
Planned: such as early retirement, career change, and other options.
Unplanned: such as burnout, disability, or other causes.
In both instances, people often fall victim to poor planning. Making an exit strategy is seen by many to be defeatist, but it’s actually smart to plan ahead.
Much of this planning is done through accurate record keeping:
-Careful accounting and records make valuing your business for sale purposes quite useful.
-Records of procedures help replacement owners quickly learn how to run a business; and
-Good filing means easy recovery of necessary records.
The difficulty often comes with two major issues:
1. Who to sell to? It’s assumed by many business owners that their children can take over, or a nebulous “they” will buy the business. However, when you make the decision to sell, you’ll want something much firmer than that. Some children are reluctant to take over a business. Also, turning the business over the the children will still likely necessitate involvement on the part of the former owner. An outright sale to a third party is often easier on stress. Over time, you should keep a record of what parties might be interested in buying your business, this list need not all be based on facts, but instead should be based on who would benefit from owning the business (partners, competitors, etc).
2. How much should you charge? While we all put great value into things we’ve built up on our own, sometimes these businesses don’t sell for what we think they are work. This is a tough one to deal with, but this is where planning works in your favor. By making plans to sell the business in advance, you’re not forced to sell it at a discount at the last minute.
So, plan ahead. You’re not being defeatist, it’s just a way of avoiding problems in the future!