Article 1 in our Exit Planning series
Planning a successful exit from a business is one of the most important decisions an owner will ever make. It is also one of the most challenging. There is no single template or process for a successful exit. Selling a business is not a foregone conclusion with these odds stacked against you:
- Only 20%–30% of businesses manage to sell [1]
- Of those that sell, 75% of business owners profoundly regret it 12 months later [2]
There are many reasons for this, with challenges appearing at the beginning, middle and end of the process. Some of the challenges we have seen in our clients include:
- Unsure how to proceed: Owners often do not know where to start, are unsure how to build more value into the business to get the best possible outcome, and may not have considered life after the exit.
- Needing to play the long game: Exit planning requires making the business transferable so it is attractive to new owners who want to pick it up and run with it. This takes time, and many new owners will still need you involved for a period.
- Getting emotional: Letting go is never easy. Owners have nurtured their business from day one, making objectivity difficult throughout the sale process.
- Letting go of your legacy: Mid-sized businesses are built on the owner’s hard work. The idea of selling or seeing someone else at the helm can be daunting. For many, preserving the legacy is as important as the transaction itself.
- Deciding on your future: What do you actually want from the exit? A clean departure? A large windfall? Or enough to fuel the next challenge?
With owners of mid-sized businesses so focused on growth and success, they often lack the time to implement a formalised exit plan. Few have the space to sit down and map out where they need to be in ten years’ time. It is a common problem.
The reality is that a robust exit strategy is a business asset. It should be integrated into the business as early as possible and treated as an essential component of the overarching business strategy. It will shape the direction of the business. You cannot get where you want to be if you do not know where you are going.
Just like the businesses themselves, exits come in all shapes and sizes, each with its own set of difficulties. The pandemic reshaped the landscape, with more than 70% of businesses operating today predicted to close within ten years, and 57% not making it past five.
Even if an owner does not intend to sell today, it pays to start formulating an exit plan immediately. It may not seem urgent now, but it will dominate your thinking eventually. The prepared owner gives themselves the best chance of maximising their exit opportunity.
What is a successful exit strategy?
A successful exit strategy means that you have planned the transition and are ready to take advantage of the opportunities presented. It balances your personal, financial and business goals as you prepare for the next stage of your life.
The process can appear complex, but it does not need to be. It can be broken into two parts:
- Preparing the owner and the business for sale
- Focusing on the business sale process
Once an owner decides to exit, they need to remove as much subjectivity as possible. The best way to do this is to work with strategists who know the right questions to ask and can provide the information and guidance needed to make informed decisions.
The exit process may feel complex or overwhelming, but it is not broken. Owners simply need support and structure along the way.
> Exit Planning Article 2: It's Personal
[1] Forbes: Study shows why many business owners can't sell when they want to
[2] Exit Planning Institute: State of Owner Readiness report 2019