Only 25% of the business owners have an Exit plan. You need a plan, Period!

According to the SBA, the #1 reason most business transitions fail is due to a lack of planning. A successful transition can take years to execute, only 20-25% of businesses sell. There’s a tidal wave of competition coming as baby boom generation business owners start to retire. 10,000 baby boomers per day turn 65 for the next 19 years. The business owners who are successful are going to be those that planned ahead!

The #2 reason business transitions fail is business owners can’t let go. You’ve worked hard and built a business you love, one way or another, you will exit the business. Having a plan and executing it increases the chances the people you care about (employees, customers, family) will be taken care of. Having a vision of your satisfying life after you exit will help you avoid procrastinating on developing your plan.

Armed with your vision, you should have some idea about how much you need to get for your business to finance your retirement dream. Is your business worth that? If not, what adjustments do you need to make to your business plan to get you there? Think of this as the transition period of changing the business from what you wanted it to be to what someone else wants to buy.

When selling your business, you need to make sure the business continues to run at optimum levels. This means Working in the Business 75% of the time. The other 25% of your time should be working on the Business which is to begin to remove yourself from the business. In order to maximize the value of your business, owners have to disassociate themselves from the business and have customers, employees and suppliers sign on because of the business and not the owner. The best method to remove yourself from the business is to train your top staff to take on your responsibilities. The more infrastructure you have, the more valuable your business.

Reduce the amount of personal perks you take from the business – Many small business owners” live” out of their businesses. Buyers will pay you handsomely for profits, but if you keep taking money out of the business for personal expenses you will automatically increase your expenses and therefore reduce your profits. The best advice here is to separate your personal and business expenses and don’t keep forking out your business debit card for family dinners, vacations, cars etc.

1. Quantify Your Business Value

No one will buy your business without knowing its worth. You need to identify which assets to include or exclude from the sale. You also have to list your risks. Then you'll have a better idea of the value of your business. It may not be worth as much as you'd expect. Completing a Valuation with a licensed professional will result in a realistic idea about price expectations and goals to meet with your exit strategy. In addition to what your taxes, P&Ls, Balance Sheets say, there can be soft value found in intangible assets which can forecast Blue Sky value. The kind strategic buyers pay higher multiples for. Partial list tangible and intangible Assets we will incorporate into the value proposition:

• Advertising Campaigns
• Know-how
• Advertising Materials
• Licenses Backlog of Orders
• Technology
• Branding
• Mailing lists
• Computer Databases Management
• Contractor
• Network
• Signature Projects
• Contracts
• Name Recognition
• Delivery Systems
• Patents
• Trademarks
• Proprietary and system designs
• Recession-resistant industry
• Experienced Staff Reputation
• Government Programs
• Supplier and distributor base
• Growing industry
• Systems and training procedure

2. Eliminate Worthless Inventory and Debtors

No one wants a business with out-of-date stock. So, if you want to sell your business, get rid of it. Same with long-term non-payers. Make them an offer they can't refuse or write them off. Both outdated inventory and debtors weigh down a sale.

3. Straighten Financial Records

Buyers want the facts, and they will be asking scores of financial questions. You must be prepared to answer everything and anything about the reporting end of your business. This includes balance sheets, assets and liabilities and the taxation position. They all need to be clean and ready to view when you're selling your business.

4. Audit Your Books

More specifically, before you sell your business, your CPA needs to audit your business records to include extensive verification, confirmation, and performance. An evaluation of internal controls can be considerable help to both you and the buyers.

5. Strengthen Legal and Contractual Affairs

Buyers will also have many legal questions when you sell your business. What is the ownership and structure of your business? Have you been compliant with the regulations for your particular business? What contracts do you have with customers and vendors? What is their status? What is outstanding?

6. Install and Improve Systems

Owners are the main source for daily operations. Unfortunately, such details are often only stored in their brains. Department manuals are a big plus when you're trying to sell your business. These how-tos do not have to be long and complicated. You need just enough to cover the basics and relieve your potential buyers' anxieties about your absence. DVDs are a growing trend to communicate operations.

7. Prepare Your Management Team

Even better than the written manuals is having someone in place who can personally answer questions. In larger firms, the buyer wants to know what manager(s) will help with the transition. Who will be the knowledge bank? How long will this source(s) be staying?