LUTZ BUSINESS INSIGHTS
When is the Right Time to Exit My Business?
BILL KENEDY, MERGERS & ACQUISITIONS SHAREHOLDER
Business owners generally don’t like to think about it, but eventually a transition out of their business is inevitable. There are several ways to transition out of a business including a sale to family members, employees, or to a third party. In this blog we will focus on the sale to a third party buyer.
Preparation and Timing
Running a business requires juggling many responsibilities and making important decisions that affect the future success of the company. It’s no wonder that many business owners fail to consider the best timing for them to transition their business. Sure, it’s a tough decision to make, but by carefully considering the following factors, the decision about timing will be made with greater confidence.
- What are your exiting goals and objectives? What do you hope to achieve? Do you have a plan for your life after transitioning out of your business?
- Do you know the true value of your business and what key factors affect that value?
- Have you put your company in the best position to achieve a successful transition?
Consequences of Not Being Ready
The Exit Planning Institute has done extensive research and surveying of business owners with respect to exit planning. The following are a few key statistics from that research:
- 12 months after selling, three out of four business owners stated they profoundly regretted the decision to sell. This was primarily due to the lack of having a plan for their life after the business.
- Only 30% of all family-owned businesses survive into the second generation; 12% to the third generation; and only 3% to the fourth and beyond.
- 70-80% of private businesses put on the market do not sell!
- Top Reason for not getting deals done is the business owner’s unrealistic expectation of the value of their company.
Goals and Objectives
As an owner, you should understand what you wish to accomplish from transitioning your business. By having a firm grasp on your goals and objectives, you’ll gain a much better idea on the right timing. Goals and objectives for selling need to be written down and revisited consistently. This process will help determine if there are any uncertainties about the reasons for selling. Uncertainty is a strong indication that more time may be needed to understand your post-exit goals.
Commitment and Dedication
Growing a business takes a great deal of time, effort and energy. This needs to be something that the owner is passionate about doing. If you are finding a lack of drive in running your company, you might want to consider putting an exit plan in place. Buyers (and employees) can sense when owners are not motivated to run their businesses anymore, and that can adversely affect the selling price. Recognizing these changes in advance can help prevent this from happening. Similarly, succession takes a great amount of energy and dedication for the owner to properly groom the successor. The owner needs to be as motivated as possible for the succession to be a success.
Achieving “Best In Class” Status
As an owner, you should want to put your company in the best possible position before exiting your business. Whether it is reaching a sales goal you set the company, or making sure your employees have secure plans following the exit, it is important to identify and successfully complete these action items. When the time comes to transition the business, it is important to feel you have accomplished everything you have set out to do. A succession plan can help identify and prioritize any loose ends.
Making the decision to exit is not an easy thing for a business owner to do. However, by taking these factors into consideration, you can have the confidence you need to exit your business on your own terms. This will lead to the creation of a successful exit plan and a smooth transition for both you and your business.
ABOUT THE AUTHOR
BILL KENEDY + LUTZ CONSULTING AND M&A SHAREHOLDER
Bill Kenedy is a Lutz Consulting and M&A Shareholder at Lutz. He specializes in business valuation, litigation support, and merger and acquisition advisory services.
AREAS OF FOCUS
AFFILIATIONS AND CREDENTIALS
- American Institute of Certified Public Accountants, Member
- Nebraska Society of Certified Public Accountants, Member
- Certified Public Accountant
- Accredited in Business Valuation
- Certified in Financial Forensic
- Certified Exit Planning Advisor
- BSBA in Accounting, St. John’s University, Collegeville, MN
- Construction Financial Management Association, Past Treasurer, Board Member
- A Time to Heal (non-profit focused on cancer patients), Past Board Member
- Net Working Capital: What is it and How is it Used?
- Issues During the Due Diligence Process in M&A Transactions
- Lutz M&A Advises Fantasy's, Inc. on its Acquisition by Casey's General Stores
- Primary Benefits of Selling Your Company to an ESOP
- Is An Employee Stock Option Plan Right for Your Business?
- Lutz M&A Advises C&W Transportation on its Sale to Platform Capital
- Our Services, Our People, and Our Results
- Lutz M&A Advises Hands of Heartland on its Recent Investment by Evolve Capital
- Lutz M&A Advises Labor Source on its Recapitalization by Great Range Capital
- Overcoming Obstacles in Business Transition Planning
- Understanding Net Working Capital in Business Transactions
- How to Increase the Value of Your Business
- When is the Right Time to Exit My Business?
- Lutz M&A Advises Triage Staffing on Recapitalization
- Lutz M&A Advises Hockenbergs on Recent Sale to Trimark USA LLC
- Lutz M&A Advises Focus Respiratory on its Recent Buyout by Valley Healthcare Group
- Is Your Small Business at Risk of Fraud?
- Lutz M&A Advises CCW, LLC on its Recent Buyout
- Lutz M&A Advises NIFCO Mechanical Systems on Recent Sale
- Lutz M&A Advises Midwest Door & Hardware on Recent Sale
- Why is Forensic Accounting Needed?
SIGN UP FOR OUR NEWSLETTERS!
We tap into the vast knowledge and experience within our organization to provide you with monthly content on topics and ideas that drive and challenge your company every day.
13616 California Street, Suite 300
Omaha, NE 68154