The fallout from the pandemic has pushed a growing number of business owners into thinking about selling their companies. Supply chain issues, labor shortages, and now, inflation are all headaches that make a business exit look attractive, even for owners of pandemic-resistant businesses, such as auto repair shops, liquor stores, and certain types of e-commerce.
2022-2023 could be an ideal time to sell your small business and move on to your next venture. BizBuySell, a website devoted to buying and selling privately owned companies, said that at the end of 2021, median sales of small businesses grew over 16%, while median revenue increased by 9%, and cash flow was up 11%. In 2022, people continue to leave the traditional workplace and choose entrepreneurship, many looking to purchase turnkey businesses with solid financials and histories of profitability. If your company fits the right criteria, you may have a window of market advantage. However, you’ll need to act while it’s still a seller’s market. And most of all, you’ll need a written plan of action to ensure you don’t make costly mistakes when transitioning out of your business.
Do you have your exit plan ready?
Do you have a succession plan ready to deploy?
Facing the daily challenges of running their companies, challenges amplified in the wake of the pandemic, the last thing on business owners’ minds is sitting down with an advisory team and creating a written succession plan. Experts in the business brokerage industry say that an astounding 80% of business owners don’t have written succession plans. However, the most successful exits that benefit both owners and employees result from meticulously thoughtful planning. Even if you think you never want to sell, creating a written exit blueprint will provide stability and guidance for the ones who’ll take over your company if circumstances force you to retire.
How to get started with a succession plan
A foundational strategy for successful exits is assembling a team of trusted experts experienced in buying and selling companies. Oddly enough, many of those claiming to be business brokers are salespeople with little to no experience in the many nuances of owning, selling, or buying a company.
Joining a small business owners group in your community or participating in a mentoring program can help locate people in your area who have had experience transitioning out of business. Advice from such experts will assist you in gaining a better understanding of the multiple steps involved in the business exit cycle and help you learn how to avoid common pitfalls.
Who will be on your transition team?
Perhaps the most incredible legacy you can leave to your family is a company you have converted into a cash-flowing machine that is well-protected against erosive elements such as taxes and inflation.
Therefore, your business exit planning team will need insurance, annuities, tax mitigation, estate planning, and business valuation experts.
Consulting with experts enables you to discover how to design a custom plan that allows you to sell your business, get cash flow for life and pay less in tax. Or, if you pass the company on to a family member or employee, they will appreciate having step-by-step instructions to make the transition process more efficient and seamless.
Waiting to do this could be costly to your mental and financial well-being
Today’s business owners are under more stress and pressure than ever before. It’s easy to understand why they continue to put off the critical task of planning for the time when they’ll no longer work in the business.
Selling a business in today’s complex and unpredictable economic environment is tricky. It makes sense for business owners to create written business plans, even owners who may be years away from retiring.
Of course, as your business (and family) grows and your financial goals change, you’ll want to review that plan and make any necessary adjustments. Doing this will pay off in many ways, and you and your heirs and employees will gain more peace of mind knowing you have a Plan A, Plan B, and maybe even Plan C ready to deploy when needed.
In preparing for your exit, you will undoubtedly discover ways to help your company run leaner and become more profitable. Imagine the peace you, family members, and employees will gain by incorporating a proven business exit plan into your business- before you need it.
If you’d like a no-cost review of your current business exit plan, or you’d like to discover more about the process of creating such a plan, please reach out to me now.