Let’s look at the most common reasons causing a business owner to sell and categorise them as requiring a quick exit or not.
The self-evident reasons that require a quick exit are, a health scare, burnout, you receive an unsolicited offer for your business which is too good to pass, divorce, death or a better opportunity arises. The other common reasons for selling a business such as, retirement, you have outgrown the business, or the business has outgrown you, or you want to take some money off the table seem, at first glance, to not require a quick exit. However, if you consider that there are two factors that determine whether the time is right to sell your business, this may not be the case.
Firstly, is the market timing right and secondly, are you and your business ready for sale. Each market cycle could last 3-5 years and getting your business ready for sale could take 1-3 years. If the market cycle does not coincide with you and your business being ready for sale it could take between 4 and 8 years to get the timing right. Consider today whether you are willing to wait 4-8 years to exit.
How can you make sure you and your business are always ready for sale? The solution is to put an exit plan in place.
A good exit plan will consider whether you are ready for sale by looking at your “cash out” requirements, what you can reasonably expect to get if you sell your business and determine the expectation gap between what you want and what you will likely get.
A good exit plan will also look at your business to see if it is ready for sale, looking at matters such as are key contracts in place, is there a management team and what level of dependency does the business have on you, are taxes in order and numerous other matters that may be a pitfall in selling your business.
The exit plan will also provide you with an action plan and estimate of time required to close the gap if there is one.