Every exit requires three things: owner readiness, business readiness, and market readiness. In this series, we explore each.
What Do You Want?
It’s the first question we ask every owner who is looking to sell their business, and one that can be more challenging to answer than you might expect. What is the #1 reason you want to exit your business? Maybe you want to start a new business because you’re no longer feeling fulfilled in your current business. Perhaps you want to stop working so much and spend more time with your family. Or, maybe you’ve just had enough and want out, A.S.A.P. Whatever your desire may be, identifying it allows us to develop a plan for selling your business, so it’s no longer a mere wish or dream.
Where Are You in Life?
In addition to what you want, owner readiness also hinges on where you stand. If you’re exiting simply because it’s time to retire, you will have different objectives than someone who is exiting because they have lost their passion or discovered a new one. This is why we often see completely different exit goals when there are multiple business partners involved. Each partner is at their own stage in life and thus has their own level of readiness. The business exit has to take into consideration all the owner’s exit and having that discussion early is extremely important is achieving that goal.
What is the Trigger Event?
Depending on where you are in life, a trigger event may be what drives your decision to exit. For example:
- Your health is declining, and you want to secure your legacy.
- A spouse’s health is declining, and you need to care for them.
- A spouse or partner in your business has passed away.
- You are going through a personal divorce.
- You have a new business opportunity that is too intriguing to turn down.
It’s important for us to identify a trigger event so we can then gauge the strength of that external pull. There is no right or wrong reason for exiting. Whether it’s emotional, financial, personal, or professional, we just want to know what it will take for you to walk away. If the trigger event is not urgent, exiting becomes more of a choice with planned out decisions.
Many owners will justify their decision by sale price. “If I can sell the business for X, I’m out,” they’ll say. But if ‘X’ is above fair market value—a.k.a. what a willing buyer will pay for the business—you might not be ready to sell, especially after realizing the taxes, commissions, attorney fees and other subtractions from the sale price. You could very well find that staying in your business is the better decision financially. Owner readiness means a willingness to sell at fair market value because it’s the right decision for you, your family, and your business.
Defining the Win
Market readiness and business readiness are pretty easy to measure. Owner readiness is much more subjective. Its soul searching, and it can be difficult. It starts with understanding what the win is for you. From there, we can build the path and the plan. Watch the short video below to see how I explain the significance of your personal journey to fellow service providers at a recent Exit Planning Institute event in San Diego.