Are you planning to exit your business? But do you have a strategy in place to sell your business to the highest bidder or hand over your business legacy to your family. Many entrepreneurs fail to put in place an exit plan and this is a huge mistake they make. You need to have an exit plan in place as it will help you move in the right direction by aligning and synchronizing your exit strategies with your long-term goals. Here are a few mistakes that should be avoided while exiting your business.
Avoid going solo
Never try to sell your business on your own. Instead, seek the help of business brokers, accountants, appraisers, exit planners and other sale professionals to streamline the process of exiting your business. They will work towards to ensure that your company is ready for the prospective buyers. Therefore, the first and foremost thing that you need to do is get a team of advisors such as investment bankers who will handle as well as the negotiate the deals and get you a better deal.
Many first-time business sellers believe that the worth of their business is more than the actual market value. They become disappointed when their business does not sell quickly or at a price below their expectations. If you are planning to sell your business, research on the recent sales of the businesses in your area that is similar to your business to gain the realistic insights. These information will give you a picture of the average sale prices and the time frame it will take to sell a business similar to yours. Your business broker should be able to give an idea about the concessions sellers or buyers make while closing the deals.
Incomplete financial records
Ensure that you have watertight financial records as this would be the first thing a buyer would be looking into. Any discrepancies will put them on high alert and they may even offer you a very low rate. Make sure that you have a best accounting and financial reporting system in place for at least three years before you consider exiting your business. It’s wise to employ a good accountant either an internal or external one in your exit strategy. They know strategies to minimize the tax burden and will ensure that you don’t receive any unexpected capital gain bill post sale.
Failing to consider tax implications
Consider tax implications as a part of your exit strategy. Your strategy should include how to minimize income taxes as well as potential estate taxes.
Make sure to consider all liquidity options
Many SMB owners think that their exit option is only an outright sale. But in reality liquidity can take many forms including
- Sale to a strategic buyer or financial buyer
- Initial public offering
- Management buy-out
- Employee stock ownership plan(ESOP)
Missing out on goals post-exit
One mistake many business owners make is not having a post-exit goals. As a result, many people avoid exit planning as they are afraid of future. There are a few personal questions that you need to address such as “What would I do if I didn’t have a business to run? How much money do I need to pursue what I want?” and so on. Unless these types of personal questions are addressed, the exit planning process stays incomplete.
These are some of the mistakes that you need to avoid while making an exit planning. If we have missed out any of the mistakes, please feel free to share it with us in the comment section.
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- Small Business Owners It’s Time To Start Planning For 2017