As entrepreneurs, our companies become extensions of ourselves. When the company succeeds, we succeed. When it hits a rough spot, we feel like failures. And if it comes crashing down – which unfortunately happens regularly – we can take it very hard.
But does the thoughtful, strategic decision to sell your business equate to giving up or failing as an entrepreneur.
Absolutely not.
In fact, selling your business may be the ultimate sign that you’ve succeeded as an entrepreneur. It really comes down to those important words above: “thoughtful, strategic decision.”
If you’re choosing to sell your business and you’re in control of the situation, you’ve succeeded.
The beauty of an exit strategy
Really, every business owner should go into a venture with at least an idea of what his or her exit strategy is going to be.
An exit strategy is the business owner’s eventual plan for removing themselves from the business they’ve built – either by passing it along to family or partners (called succession planning) or through a business sale. Entrepreneurs who go into business with no thought to how they expect to eventually remove themselves from the business are doomed to be stuck working the rest of their lives.
Granted, if you truly love what you do, that’s not the worst thing in the world. But it still leaves a lot of financial and legal matters unresolved and can leave your company strategically aimless in a fast-moving commercial environment that requires strong direction.
On the other hand, a clear exit strategy, including a timeline, milestones to reach, and a goal for what you hope to get out of the eventual sale of your business, can keep your company moving forward with clear direction and provide personal fulfillment and a sense of expectation for you as the owner.
Preparing your business for sale
In line with your planned exit strategy, you’ll be able to tell how close you are to the eventual sale or succession of your business. If you’re planning to pass the business along to your children, one or more business partners, or employees, now is the time to begin grooming your replacement to handle your responsibilities and guiding them in planning for the future.
If you’re planning to sell your business, there are some important actions you need to take to be sure the company is optimized for sale:
- Get all business records in order – While running your business may be second nature to you at this point, it’s likely to be a brand new adventure for a prospective buyer. Their first concern, understandably, is going to be making sure the business is profitable and well run. That means thoroughly reviewing your legal, financial, and business records. So make sure they’re clean, neat, organized, and complete.
- Obtain an accurate value of the business – You know your business better than anyone else, but when it comes to placing a realistic dollars-and-cents value on it, you’re best off relying on professionals who are experienced in valuing businesses of your type and in your area: a commercial real estate professional, business broker, and accountant with experience in business valuation can all be helpful.
- Clean and maintain the physical location(s) – Much like when shopping for a home, the “curbside appeal” of your business locations will have a huge impact on your prospective buyers. Even if your business is running like a top and profits are consistent, a dirty or rundown location may prevent a buyer from even getting as far as researching your records. On the other hand, a clean, neat and inviting premises can make a powerful first impression.
- Involve employees – Keep your employees informed and up-to-date on the progress of the sale so they can play an active role in keeping things looking good and running smoothly throughout the sales process. This also helps them stay productive if they’re not left up in the air, wondering whether they’ll even have a job the next day.
- Arrange to remove yourself from daily operations – Although your exit strategy may assume you’re going to continue operating the business right up to the last day, it’s important that prospective buyers can easily see themselves stepping into your role. If it appears that the business can only be successfully run with you at the helm, no one is likely to take the risk of buying it. To accomplish this, set up systems and train replacements that will allow you to step aside, especially late in the sales process, to concentrate on courting a buyer.
Selling your business is not the same as quitting
As you can see, selling your business in a planned, strategic way is the farthest thing from quitting or giving up. In fact, it’s a natural part of the entrepreneurial adventure, and should be part of your business plan.