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Mar 19Jeff Farren

3 Reasons Your Business Exit Can Fail

Mar 19Jeff Farren

The reality of business ownership is that someday you will exit the business. For some of you this will be a satisfying conclusion to a successful career.  For others, the exit will bring disappointment and possibly financial disaster.  If your exit process doesn’t involve careful planning, you could be in for a tumultuous experience. In the years leading up to the sale of your business, avoid the following reasons your business exit can fail:

  1. No Exit Strategy: Carefully consider your post-transaction needs (both financial and lifestyle) and work backwards to the present.  What needs to happen to make this a reality?  Failing to formulate an exit strategy is the number one reason business owners miss their mark.  To paraphrase the Cheshire Cat, “When you don’t know where you’re going, any road will do.”
  2. Lack of professional guidance: The skills necessary to build and run a business are not the same skills and activities necessary for a successful exit. Furthermore, time spent by the owner on the transaction and not on the business creates risk that the business and its value will suffer.  Wise business owners hire experts to assist them with the pre-sale preparation as well as the execution of the sale.
  3.  Not thinking like a buyer: When you sell a house, you focus on curb appeal, right?  Same is true when selling a business, especially in the buyer’s market that will exist when 12 million baby boomers need to sell their businesses within the same time period (the next 10 years).  So what can you do to make your business more attractive (more valuable, less risky) than your neighbor’s business?  Address items that prospective buyers will scrutinize such as sales growth, customer diversification, new products in the pipeline, accounting and IT infrastructure, well documented processes and procedures, and growth of the most important determinant of value…EBITDA.

Careful planning and guidance are a good place to start when you want to transition out of your business. Interested in learning more how to execute wildly successful exit strategy and avoid these reasons your business exit can fail? Contact me at 317-513-4016 or jefffarren@b2bcfo.com.

photo credit: Crossroads: Success or Failure via photopin (license)

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