what’s your exit plan?
how much is your business worth?
always start with the end in mind!
When you start your business with the END in mind, you do everything differently. Your strategic plans, team building, expenses, investments and especially your growth plan look different when you take time to consider how you will EXIT your business.
Every business owner begins as a start-up. Some are lucky to start off with a team, but most of the time it takes time to build your business. In the start-up phase, you are everything in your business. You are every role and it feels impossible to lead with vision. Even though you’re still growing, selling your business in the start-up stage is very difficult. It isn’t until you become a Visionary that you can get the highest value for what you have built!
When you are in start-up or even after you have a small team, it may seem difficult to consider your exit plan. If you’re anything like I was, you are too busy to think about what’s happening tomorrow!
There’s only a few ways out when your ready to exit:
You can close/quit/give up
You can pass it down or give it away
You can die
You can SELL
When you start with the end in mind, you’ll operate as a business owner instead of an employee of yourself. You will build teams that run your business for you. You’ll delegate all of your tedious jobs that keep you in the weeds. You’ll find freedom in your life that you deserve.
The BIGGEST benefit to creating an exit plan in the beginning stages of your business life cycle is to create greater monetary value so your business valuation at the time of sale will be at it’s best.
HOW DO YOU VALUE YOUR BUSINESS? WHAT ARE THE STEPS TO SELLING?
(reference: Durand Advisors, New Orleans LA)
Step 1: Partner with a qualified Advisor - I recommend having a conversations with a few advisors who specialize in selling companies. Make sure you get to know their process, the financial obligation and the history of what they have sold in the past. When I sold my business, I got an evaluation every 2 years to see how the growth of my company was progressing. When it was time to sell, I used the company that did those evaluations because I trusted them.
Step 2: Research - Once you have decided on the proper advisor, hire them. They will want to take a tour of the premises and speak with you about your objectives for selling. They will then make recommendations based on their findings. In order to get the most out of this first meeting, it is recommended that you should consider bringing the documentation listed below. By having these documents on hand, the advisor will be able to give specific answers instead of generic ones.
Documents Needed To Sell A Business
3 Years Profit and loss/Year to Date Profit and Loss statements
3 Years Tax Returns
3 Years Balance Sheets/Current Balance Sheet
Itemized list of all furniture, fixtures, and equipment (FF&E)
Value of inventory
The legal description of the real estate and any legal maps or plats or recently dated appraisals or if leasing space, copy of the lease
Step 3: Business Valuation - The advisor you select will want to give you a proper business valuation. There are a number of factors that go into this final number. Your revenue, assets, business history and your role as the business owner all play a huge part in this valuation.
NO ONE WANTS TO BUY A JOB. THEY WANT TO BUY A BUSINESS THAT CAN RUN WITHOUT THEM!
Step 4: The Market - This step begins by signing a formal engagement agreement. The advisor will then create and execute the marketing package. The marketing program will vary based on the plan for the business, but this is the time that potential buyers will be identified (if they have not been already), marketing materials generated, and the formal marketing process will begin. If the business has a local physical location, it should be scanned with the 3D camera and a model will be created.
Step 5: The Closing - Once an offer is accepted, due diligence begins. The advisor will guide the seller and facilitate due diligence for the buyer. When closing appears definite, the seller’s advisor will contact the agreed upon closing attorney to draft the closing documents. A walk through of the business will take place directly before closing and then the buyer and seller will meet at the closing attorney’s office. Once the documents are signed, the seller will be issued their check. The buyer and seller will usually go directly to the business to begin the transition process.
