An Exit Strategy for Your Business, 5 Points

One might ask, “When is the best time to start on your Exit Strategy?” You may have heard the old saying that it’s the day you start your business. The reality is, as you are ramping up your business, there are other priorities. Once you get yourself established and have a little extra time, though, you should start positioning your business for the time when an exit makes sense.

Predicting a misfortune is not possible, but you can plan for it. One never knows what the future will entail, including a family issue, an illness, or an accident that would require you to sell. When you get to the point where the business is no longer fun, or you find yourself working as a manager dealing with the same old things each day, as compared to an entrepreneur creating and exploring new possibilities.  That is when you need to consider selling and preparing for your exit.

  1. Have someone active in the market suggest an asking price range, such as a business broker.
  2. Buyers want to see clean cash flow. (financial statements) not just tax returns. Be prepared with month by month statements for the prior three years. For the best price you need to show you cash flow and sales growth, year after year. 
  3. Minimize “clutter” in the financial statements, such an add-backs (non-business expenses).
  4. Work to minimize customer sales concentration, no one customer representing more than 10% of total sales.
  5. The business should not be “you.” Have systems in place so your customers are dealing with the company and its employees, not you.