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The end goal for most business owners is to grow their business to the point where they can sell or they are able to transition out of the leadership role and “work themselves out of a job.” 

While it’s easy to focus solely on achieving the level of growth to sell your business, you should also consider what the transition itself will look like. 

It would be ideal if you could simply plant a “for sale” sign in front of your office and wait for the deals to arrive. Sadly, things rarely work out so easily.

Exiting your business is a complex process. Owners must simultaneously balance the wellbeing of the business along with securing their personal finances. 

To pull it off, you need a comprehensive plan which enables a smooth transition process. Here’s what you need to do: 

1- Assess your business from the top down:

You can’t plan without a clear vision of the current state of affairs. Your analysis should be focused on the goal of (a) establishing an estimated value of your business and (b) how favorable current conditions are for a transition. 

Start with your financials. What is the current balance between debt and equity? How healthy is your cash flow? Is the business growing? How profitable is the business?

Then move to operations. How integral are you to the day to day activities of the business? Do you have internal team members who could take over your responsibilities, or will someone have to be hired to do the tasks that you currently handle? 

It’s also important to consider the external environment. What are other companies of a similar size valued at compared to your company? Are economic conditions favorable for attracting potential buyers? 

The answers to these questions will determine the timing and process of your exit. 

2- Organize important documents and metrics:

As you comb through your business, make copies of any important documents to prepare to send those to the seller or to whoever is taking over your role. This list should include copies of contracts, articles of incorporation, and tax statements, among others. 

You should also compile your financial metrics. If you are selling the business, these documents are the evidence you will use to justify your valuation. It’s important to build a strong case. 

3- Get a valuation and consider your personal finances: 

Once you have the information you need, have an expert calculate a valuation for your business. You’ll likely have to consult with a wealth manager to compare this against your future living expenses and other financial goals to ensure you’ll have the resources you need. 

With a valuation established and your projected needs estimated, you are able to consider the viability of different offers. 

4- Consult with experts:

Handling the myriad details and questions throughout the exit process is challenging even for the most astute business owner. Further, your primary goal is to steer the ship and make sure that your business’ performance is not derailed by your attention to assembling the data required to analyze sale potential.

For this reason, it’s beneficial to consult with advisors and experts throughout the process. Specialists in areas such as tax, law, and financial strategy are able to identify potential issues and make cost-saving or valuation-increasing recommendations.

While this advice is the last on the list, I would recommend connecting with these experts early on in the process. This gives them more time to assess the state of your business and make holistically beneficial recommendations. 

If you are preparing to transition out of your business, CapShots™ is here to make the process as easy and painless as possible. Our financial expertise enables you to accelerate the process, maximize your valuation, and minimize your expenses along the way.

Connect with us today!