The Perpetual
Business Exit Strategy

When I talk with business owners and managers of going concern businesses about their business exit strategy, most will admit that they don't have any sort of written down or conscious plan in place.  Sure, they may have some picture or vision in their mind as to how things will play out, but for all intents and purposes there is no real plan or strategy to follow.

The more common reasons for a lack of an exit strategy include 1) its too far in the future to worry about; 2) I'm going to leave the business to my children, 3) I don't have any time to think about such things right now, and so on.

Regardless of the reason or excuse, the absence of a plan is going to likely result in less proceeds from sale.  And if you're expecting to fund the majority of your retirement from the eventual sale of your business, your retirement plans may be in jeopordy if everything is just left up to chance.

When I mean chance, I'm referring to the classic scenario when the day comes to retire and a fore sale sign is stuck in the ground to attract all those rabid buyers that may or may not be interested at that time let alone exist at all.  For a more predictable result, more planning and thought is likely going to be required.

The sad reality is that the majority of businesses will never be sold as going concern entities, receiving instead discounted offers for the assets that remain.

Why?

Because in order for a business sale to be successful, the business has to be 1) in a sellable position, 2) able to support the cash flow being generated over a number of prior years, 3) offered for sale at a time where there is an active market for what's being offered.

And we can further define success as receiving the sales proceeds expected in the time period set out for the sale to close.

To achieve the desired results, a certain amount of planning should be undertaken not to guarantee success, but to increase the probabilty of conducting a successful sale in a timely fashion.

One approach to planning a business exit strategy is to develop what I will call a perpetual exit plan.  The basic premise here is to get the business in a sell-able position right now and keep it in that state for as long as you own the business.  Stay on a growth path to increase the enterprise value each year and always be open to selling the business at any time.

The rationale is that the market will dictate when its the best time to sell for the best price.  So even though it may not be the owner(s) intention to sell sooner than later, having an exit mindset allows you to take advantage of opportunity when it presents itself.

And just because someone comes by tomorrow to buy your business doesn't mean you have to sell.  But if a highly motivated buyer happens by and offers you more than even you think the business is work at that time, wouldn't it make sense to seriously consider the potential transaction?

By always having your business in a ready to be sold state, you have an in place business exit strategy that could prove to be quite profitable, perhaps even sooner than later.

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