Last week, my guest on the Business is ART podcast at the TrueChat Network was Kate Vriner from Sunbelt Business Advisors of Southwest Ohio, and the topic of discussion was in fact Exit Strategy Planning.
A financial valuation is step 1
Kate advises that the very first step in preparing an exit strategy is to conduct a valuation of the business. Initially there are 2 or 3 parties whose opinions really matter here:
- The owner’s
- The broker/advisor’s
- The independent 3rd party analyst (when needed)
These are critically important because at the end of it all, there are one, two or more parties whose opinions really matter: the buyer’s and potentially the bank’s and the investors’.
Put together a strong team
In this case, your team consists of many external parties including, but not necessarily limited to:
- Legal Advisor
- Business Broker
- CPA/Financial Advisor
- Business Consultant/Coach
Once the team is together, you have to trust the team and trust the process. Your business was likely not built overnight and likely won’t be sold overnight. To get the most out of it, you have to do the things that your advisors suggest, which may not always be intuitive, and may not always be easy, which leads to this…
Get out of the weeds
When you are planning your exit strategy, if you haven’t already, now is the time to pull yourself out of the weeds. As Kate puts it, focus ON the business, not IN the business.
You may love being on the shop floor producing whatever it is you produce. Or you may feel you can’t afford to hire someone to produce whatever it is you produce. But the fact of the matter is, you have to in order to maximize the value of the business.
When a potential buyer is looking at your business, aside from wanting to see a clean set of financial books, he or she is going to want to see that the business is transferable. If the business relies on you to produce whatever it is you produce, clearly, the business is not transferable to someone else (or is less so).
In other words, if the business cannot function without you, there is no business that can be sold and transferred to someone else. There may be real estate or assets that can be sold, but there is no business. Hence, there is far less value.
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