"What is your exit plan?"
Business owners should start asking themselves this question on the day they open their doors. But they don't. There are many reasons for this, beginning with the hope that the business will never fail. Even in the rare businesses that do last, however, there inevitably comes a day when the owner wants to leave the business. Preparing for that day is the key to a smooth transition.
Entrepreneurial businesses often follow this trajectory: When the business opens, the entrepreneur-owner does everything from sales to bookkeeping. As the business grows, the owner gradually delegates various tasks to trusted advisers, employees and contractors. Then the day arrives when the owner realizes that he or she is ready to try something else or retire.
That day is not the day to begin thinking about an exit strategy. Ideally, there will be at least seven years between the time when the owner recognizes the need for a plan and the day when the business finally transitions to its new owners. If there are only three years, the plan is considered a short-track one. Any plan shorter than that leads to a frantic hunt for a buyer, possibly resulting in less-than-optimal terms.
Here is a three-step checklist that will help avoid the latter result. Note that this checklist assumes a single owner.
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