I hear it more and more coming from Baby Boomers. This question is often posed casually: “So what do you think, should I start my exit plan 2 years ahead, maybe 3 years ahead?”
They often ask knowing the answer. They are trying to make themselves feel better because they haven’t created an exit plan and they know they should have started it long ago. If I respond that waiting until 24 months ahead of sale is ok, they can let themselves off the hook for not having an exit plan in place.
- Some say they are tired and would like to get out. They do not want to put in much more time or invest in building the value of the company. Yet, they are not satisfied with what it is worth today.
- Some in family businesses have put off building a succession plan for a generation to generation transfer. They may feel they have time, or they may feel that their children (children often in their 30’s and 40’s) are “not ready yet”. They may fear losing an income stream as they transition out of the business.
- Some are simply working the business, taking no time to develop an exit plan that could dramatically increase the value of the business when it comes time to sell.
If you do have just a few years, there are a number of things you can do to optimize that exit and get everyone on the same page. But “2 – 3 years” is NOW, especially if you are a business owner in your 50’s, 60’s, 70’s or older. You have heard when talking about stocks that you can’t time the market. It’s the same thing for your business. And, remember, the sale process itself can take 6 or 9 months to a year.
There will be a downturn in the market. Getting caught in that next downturn will likely reduce the value of your business. Perhaps more importantly, it could keep you captive in your business for another few years as you rebuild.
- Do you know the value of your business? Don’t rely on a value that is some industry multiple or that sounds reasonable or what you’d like. Get professional assistance. This is your life, livelihood and retirement.
- When do you want to be completely or mostly out of the business?
- Can you wait out the next downturn? If you are thinking of a 2- to 3-year timeframe, what if the economy slows down? Can you wait another few years to rebuild the value of your business? Or are you willing/able to walk away with less money?
- Do you have a solid plan for what you will do after your exit?
The message is simple: work with your advisors now to get a good understanding of your situation. The more informed you are, the better positioned you will be in creating an exit plan that works for you, maximizes value and minimizes risk. You will leave the legacy that you want, not what others want. You will create your future!
Get Started on Your Exit Plan
If you haven’t begun to plan, get on it! Get a business valuation done, build your advisory team, start on building business value!
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Succession Planning / Exit Planning, Building Transferable Value for Sale
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