Some Exit Planning Mistakes

The first and worst mistake is not developing an exit strategy long before you need one. Waiting until you have to sell is not a sound exit strategy.  Unfortunately, it's the one used by too many business owners.

Once a business owner decides to sell, he or she must be proactive. Selling a business is not like waiting for Publisher's Clearing House to knock on the door and hand you a big check. That's why it pays to develop an exit strategy and succession plan long before it's needed.  It's also important to consider all options. An outright sale of the business is the most common scenario, but other options may involve a sale to management, an ESOP, a recapitalization, or an intra-family sale.

As part of the exit planning strategy, knowing what the company is worth is critical. Ideally, this should be evaluated every year.  Only by knowing the value of the business can owners decide if the value coincides with their "exit requirements".  Keep in mind that market conditions greatly affect value.  A professional business intermediary can assist in this process.

Another important thing for an owner to consider is, what will they do after they sell their business.  Many owners place their business up for sale and only give thought to what they are going to do next after they receive an offer. This often results in panic as they consider what they will do and how they will finance it.  At this point, some owners abort a pending sale or take their business off the market.  This thought process about what life will look like "post-sale" should be done long before considering selling.

Another mistake is failing to take advantage of the outside professionals that are available. Attempting to fly solo in the selling process is a big mistake. It is prudent to have an outside team of professionals with transaction experience. Starting with a professional business intermediary is a good start.