If you’re like the most business owners, your business plays a major part in your retirement plans – even Warren Buffet & Bill Gates agree to this! Unlike these 2 gentlemen you may not have had the opportunity to fund your retirement beside from your home and your business. OK your plan might be that you will just sell your business and retire on the proceeds, as an exit strategy this is very common.
But what if you cannot sell your business at the time you need to – your retirement plan could collapse! There are several issues that you need to address with your exit plan if you plan to sell your business and retire with sufficient funds.
Do you have something worth selling?
Many successful businesses rely on one person, i.e. their success is based on the creations, ideas, energy and charisma of one individual. When he or she goes, so does the business.
Some businesses have been very profitable the past but have been superseded by new technologies and competitors. Video stores, for instance, are now in their sunset years and record stores are obsolete.
Do you actually have a business that someone else is going to want to buy, or will someone else be able to profit from this business in years to come?
Be realistic about your small business’s worth.
What is your small business actually worth – maybe not what you think it is?
What someone is willing to pay for your business may not be as much as what you want to get for it. Small businesses are like houses; they’re both only worth what someone is willing to pay for them, and no more! What you will get on the open market at the time you want to sell them may not be what you hope they’re worth.
If you don’t know what your small business is worth right now, you need to find out! We don’t all get to pick our retirement dates, instead a sudden illness or unexpected event can change everything and force us to retire before we plan.
Start preparing to sell now.
If you had to sell your business immediately would you be able to? More importantly would it be in good shape to get the best price or even be attractive to potential buyers?
Ideally, you would like to have at least 3 years of good financial performance and sell when your business has still some growth left in the engine. You also need to tidy up your balance sheet, which could mean moving around certain assets or removing bad debt.
Create an exit plan to ease the transition.
3 years of solid financials is a great goal, but it’s just one thing that needs to be done to get your small business ready to sell. Just painting the front of the house is not enough to make the sale.
As with any plan pull together all the necessary documentation you will be asked for, including business records, customer data, inventory – and everything needs to be tidied up and easily accessible.
Creating an Exit Planning Makes a Difference
Who wants to be the person who goes to sell their business and retire and then discovers that all they have to sell is some inventory and fixtures? Drawing up an exit plan to sell now and doing what you need to do to make your business an attractive proposition will ensure you can sell when you want to or need to.
If you want some key advice on how to take control of your future with an effective Exit Strategy, or if anything in this blog rings bells or resonates with your own experience, feel free to make a comment below or call Phil on 07720 397040 or email him.