From: IAG M&A Advisors
As a business owner, why is it so hard to exit?
I have always read how important exiting is while the business is profitable and growing, more importantly while I am still healthy to enjoy the rest of my life, but why do I keep putting it off?
I would start by saying that it’s human nature. Before you beat yourself up as a business owner, the reality is that it’s human nature to not be very good at thinking about what life will be like at some point in the future. It’s the reason that we have automatic withdrawal from our paychecks into retirement savings accounts; because when you are in your 30’s it can be really hard to plan for what life is going to be like when you are in your 60’s or 70’s.
Today you may be thrilled about running your business. Things are going well. Why do you need to think about exit planning? Some people find the mere mention of it depressing. They figure it’s something they’ll deal with “when the time comes.” Yet the reality is that figuring out how to successfully leave your business is something that takes a lot of planning and preparation. It usually takes at least a year to sell the business itself, but it could take two or three years prior to that to prepare for a sale. If your desired exit strategy is an ESOP or some other internal transfer, that could take 5 to 10 years. Whether it’s exit planning or some other long-range goal, we all have a tendency to procrastinate. So that’s my “free pass” answer; it’s human nature.
I think one of the reasons we procrastinate is because the thought of how we’re going to leave our business quickly becomes overwhelming. From the complexity of how to do it, to doing the work involved to prepare, put a plan in place, act on it and try to understand all of the details — it makes your head spin. Pick any topic around selling your business, M&A, or exit planning and it can quickly turn into a complex or highly technical discussion — valuation, transfer methods, contracts, legal and tax issues, and the list goes on. You can get into the weeds fast. So you take a complex topic with big financial implications, then couple it with all of the soft issues that need to be addressed and it just becomes too much.
My advice is to tackle exit planning in the same way you would tackle any really important goal in life. Instead of procrastinating and getting overwhelmed, start with your M&A Professionals. Have confidence that they also have a deep motivation to get your business sold at the highest value the market will bear. Number two, have the proper Valuations and Documentation completed. This will establish a realistic business value to
help you go to market at the “right price”.
If you undervalue your business you could leave 10’s of thousands of dollars on the table and never know it! If you over value your business you will never sell it!
INC. Magazine recently published a study that found that 4 out of 5 businesses that sold left 30% to 70% of their value on the table!
That is a very sobering Epitaph…
The reality is that someday you’re going to leave your business, whether it’s voluntary or involuntary. The happiest sellers I’ve met are the ones who left their businesses under their terms when and how they wanted. So, if you have good health, great plans for you and your family, and a bucket list unfulfilled, focus on them because in a heartbeat it could all change.
The ultimate goal of getting the sold sign on your business does not have to be elusive, tiresome or painful: you don’t have to run around fighting windmills like Don Quixote. You run your business and IAG will run your exit to help you fulfill your dreams…