The impending retirement of the baby boomer generation has prompted many business owners to contemplate their exit strategy. Unfortunately, for many, the idea of exit planning is overwhelming, leading them to put it on the backburner. However, the most successful exits come from early planning, careful preparation, and a thoughtful strategy. While it takes time to develop a strong exit plan, the longer the planning process, the better the outcome and the more options available.
Delaying exit planning until the last minute can limit the available options, making it difficult to achieve the desired outcome. Some exit options take years to successfully implement, making early planning all the more crucial. To maximize the value of the business, owners need to start thinking about their exit strategy well in advance of their retirement date.
While receiving a substantial payout is important, it’s not the only consideration for business owners. Many are more concerned about ensuring the continued success of the business, looking after employees, customers, suppliers, and other stakeholders, and leaving a legacy. To achieve these goals, exit planning is essential.
Several well-respected business advisers, such as Steve Covey and Michael Gerber, have stressed the importance of developing an exit strategy, advocating for an early start. Covey’s second habit, “Begin with the end in mind,” emphasizes the need to consider the ultimate outcome from the start of the planning process.
Developing an effective exit strategy requires careful consideration of the business’s financial health, operational efficiency, and overall sustainability. Business owners must take a comprehensive approach, considering both the internal and external factors that impact their business’s success. This requires assessing the current state of the business and identifying any potential areas of concern that could impact the business’s future success.
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Once areas of concern have been identified, owners can develop a strategy to address them, ensuring the business is in a strong position to thrive beyond their departure. This may involve restructuring the business, addressing operational inefficiencies, and identifying potential buyers or successors.
Owners should also consider how their departure will impact the business’s employees and stakeholders. A smooth transition ensures that the business can continue to operate successfully after the owner’s departure, reducing the potential for disruptions or negative impacts on the business’s reputation.
In conclusion, exit planning is a critical component of business ownership that requires careful consideration and planning. Delaying planning until the last minute can limit the available options and make it challenging to achieve the desired outcome. Business owners should start planning their exit strategy well in advance to maximize the value of their business and ensure a smooth transition for all stakeholders. By beginning with the end in mind, owners can create a legacy that reflects their values and ensures the continued success of their business.
ABOUT THE AUTHOR
Tim Fawcett CEPA, CAP, CMEA
EastWind Business Solutions Inc.
Tim Fawcett, the founder and managing director of EastWind Business Solutions, Inc., a merger and acquisition advisory firm that specializes in strategic sales of SMEs with revenue between $2M-$100M+, has provided strategies to over 2000 baby boomer business owners in Canada and the USA, helping them accelerate value and prepare their businesses for sale and guiding them through best practices in exit planning.
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