A lot of the advice out there about exit strategy planning really pertains to large corporations – not small businesses. After all, when you run a small company, you really don’t need to know what an IPO looks like or the ins and out of equity laws. You just want to plan a great exit for your company down the line in as little time as possible.
Here’s what you need to know about small business exits.
==> Cultivate Relationships with Business Brokers
One of the first things you should do is cultivate relationships with business brokers. Ask other people in your industry who they use to buy and sell companies.
Talk to a few business brokers and get a sense for how they work and what they look for in potential deals. These relationships will make it a lot easier for you to make a sale when the time comes.
==> Develop Relationships with Similar Businesses
Make it a point to develop relationships with other business owners. If you’re in the restaurant industry, get to know other restaurant owners. If you own a hair salon, get to know other salon owners.
More often than not, buyers of businesses are people who already own a business of that kind. The person who’d buy your sushi restaurant is likely the person who already owns a Thai restaurant.
Visit other establishments and introduce yourself to other business owners. Build your network, so that when you want to sell, you can.
==> Remove Yourself from the Equation (When Possible)
Whenever possible, aim to remove yourself from the equation. Small business owners are perhaps the #1 largest offenders of the “work on your business, not in it” rule.
If you’re finding yourself regularly cramming your schedule with more and more hours, something needs to change.
Promote one of your existing workers to general manager position. Or go outside your staff and hire a new general manager. Do what you need to do to take yourself out of the everyday operations.
Does that mean you can’t step in and help at all? Of course not. If an emergency comes up or if a crucial staff member calls in sick, you can still come in to help out. But day-to-day operations should be able to run without you.
Once that’s the case, you’ll have a much better chance of selling your business.
==> The Finances
Finally, make sure all your profit loss statements are in order. Make sure you’re tracking all your income correctly and that you’re filing the amount you make on your tax returns.
Business buyers will only pay for what you file in taxes. You can’t try to claim you make more than you filed for. So make sure all your finances are in order, ideally at least 2-3 years before trying to sell.