Exiting a business takes a lot of planning and preparation. One of the initial first steps you need to consider is: when to exit.
This can be a tough decision to make, but there are a few factors that business owners might consider helping make the decision easier:
Growing a business takes time, effort, and energy, and it is something owners must be passionate about doing. It is common for potential buyers (and employees) to sense when owners are not motivated to run their business anymore. This can adversely affect the operations of the business, including sales, profitability, and ultimately the selling price. The owner needs to be as motivated as possible for the succession to be a success. Another factor that leads owners to sell is their available financial capital. If a company does not have the necessary capital to advance to the next level, it might be time to exit.
Per a recent study by the University of Connecticut, more than 70% of former business owners regret selling their companies less than a year after the sale.
What accounts for this level of seller's remorse?
The primary reason is the lack of preparation on the part of the business owner. Preparing your exit plan is like building a home or even how you built your business. Each piece of the process needs to be in place for maximum performance. This can generally take 3-12 months or possibly more to develop.
Key tasks need to be completed during this critical phase, including determining what the ultimate exit will be. Many options are available to the owner, including a sale to an outside party, including a partial sale (majority/minority), Employee Stock Ownership Plan (ESOP), or transitioning the business to a family member.
Have questions? You should. Our experienced Exit Planning Advisors are always available for a no-cost and confidential consultation.
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