3 Goals to Set Before Exiting Your Business
Every entrepreneur exits their business. Whether you look forward to that day or dread it, at one point you will leave. Even the entrepreneurs who say that their business is their baby, that they will never give it up, will one day do that—either due to life events, health, or even death. As much as you may cherish your business and can’t possibly think of doing anything else, you will one day die, therefore exiting the company.
It sounds morbid, but it’s a reality we all must face. The sooner we face it, the sooner we can plan for it. The good news is that in planning for your exit, you can ensure its success.
On Season 6 episode 16 of the Making Bank Podcast, Joe Valley discusses how to make the most of exiting your business. In consulting thousands of entrepreneurs over the years, he has witnessed which ones walk away satisfied—and which ones don’t.
A Satisfied Seller
Before we delve into exactly how to walk away satisfied, it’s important to understand what that looks like. Joe specifies that a satisfied seller could be any age, at any stage in their business, and receive any number. Some sellers are happy with a specific number, others are happy to now be allowed to pursue another dream. Whatever the case, your satisfaction—and happiness—after the deal closes relies on several things. Dollars, dates, and feelings.
Before you come up with a plan to sell, you must have a frank conversation with yourself about these three categories.
The first and most obvious area to tackle is the dollar amount you have in mind. More specifically, what you walk away with and what that may look like. Obviously, you want to get the most out of your business as possible, but it’s a little more nuanced than that.
Joe encourages every entrepreneur to ask themselves questions, such as what number would you be happy with? All cash or a different deal structure? Additionally, you must ask yourself the most difficult question. What is your business worth? What is it actually worth?
If you want over $1 million for your business but it’s not worth even half that, then how can you ever expect to sell it for that? In the episode, Joe gives the appropriate, concrete way to assess your business.
It’s helpful to know the value of your company now even when you’re still growing. In fact, it’s always important to know the value of your company. Joe says you’d be surprised by how many entrepreneurs don’t know the actual number. So, you have nothing to lose in assessing it appropriately.
If your company isn’t valued at what you think it should be—that’s okay. You can’t grow properly if you don’t know from what point you are growing. The good thing about valuing your company is that you can then quantify how close you are to your goal, which makes it much easier to reach it.
The next thing to know is when. When do you want to sell? In five years? Ten? It’s important to know how long your runway is in order to determine what changes to make.
Perhaps your timeline is less rigid than a specific year and hinges more on a specific goal. Once you reach a certain number of employees, certain revenue stream, or even other elements, may be what you are determined to reach before handing the business over to someone else.
Whatever the case, learn how long you want to spend getting your company ready to sell. Some changes that prep your business to sell take a long time. Others can be done tomorrow. For example, simple tasks such as writing down your processes can make a big difference when it comes time to shop the company around. Writing down processes can take a day, or it can take months as you still figure out what those processes are.
On the other hand, if you never want to give up your business, that’s important to decide as well. Making that decision, however, doesn’t exempt you from creating an exit plan. Instead, it proves that an exit plan is essential. If your company is your baby, then you will want that baby to continue growing after you’re gone, or if life events force you to give it up. And it can—with a proper exit plan.
Once you know what point A is, you must examine how long you want to take getting to point B. A timeline will not only inform your plan, but also your priorities.
The last aspect Joe urges entrepreneurs to consider when coming up with an exit plan is feelings. While this may sound silly, Joe believes it is one of the most important factors in selling your business. Once you’ve determined how and when you will exit your business, think about how you want to feel.
Perhaps you want to give up the business to pursue other ventures. Maybe it’s to retire or spend more time with the family. The most successful exits that Joe has witnessed over the years are when individuals feel relieved and unburdened once giving up the business.
Whatever the case, you’ll know it’s time to sell when the business has outgrown you and you’ve outgrown it.
Overall, the real success comes from accepting you will exit the business one day. Once you’ve done that, you can then set goals to make sure you do so in the best possible way.