Why Plan a Business Exit Strategy?
It’s simple. A well thought out business exit strategy maximizes your client’s chances of successfully selling a business.
There’s no downside to succession planning and developing an exit strategy. If your client later decides not to put the business on the market, exit planning will have improved the business’s profitability, operational efficiency, and effectiveness as well as its position in its industry.If you have a client who wants to sell a business in the future, encourage exit planning as a way to create a better business, higher profits, and a more stress-free life today and in the future.
Why Your Clients Need Exit Planning
When it comes to selling a business, the seller is always at a disadvantage. The buyer doesn’t have to buy—there are plenty of businesses on the market to choose from—but the seller must sell.
Your clients will also have a lot of competition when selling their businesses, much more so than in the past. The baby boomers who spent their lives building successful operations are reaching retirement age and many of them will put their businesses on the market at the same time as your clients. Because it is increasingly difficult to capture the attention of potential buyers, succession planning is more important than ever.
Investing In The Future
Developing and implementing a successful exit strategy costs money but the returns for your clients can be very high. Here is an example you can give to help them see the benefit:
Let’s say the anticipated sale value of a business is $20 million. If the owner spent $100,000 to do all the things necessary for a successful sale, the business might easily sell for $22 million. That’s an extra $2 million on an investment of $100,000. And that’s a 2000% return. Chances are your clients may do even better than that.
Why Business Owners Don’t Have An Exit Strategy
It’s a fact that most business owners don’t have an exit strategy. They simply choose an M&A advisor when they’re ready to sell. There have been several studies trying to figure out why owners avoid exit planning. They have come up with various theories, such as sellers not wanting to deal with losing a big part of their lives, or being too busy to take the time.
I think the real reason is that most owners simply don’t understand that selling a business is very different than selling just about anything else. It’s certainly not like selling a house. You can’t simply decide to sell, hand the job off to a broker, and wait for offers.
Selling a business is more like building a house, or maybe even more like building a business, and your clients need a succession plan and exit strategy to do it in a way that will accomplish their goals.