Business Exit Common Mistakes and How to Avoid Them

Most business owners have the majority of their wealth tied to their business. They’ve built their business from the ground up and put in hours and hours of hard work. When it’s time to sell, it’s crucial to create a business exit strategy that reflects the excellence of the business.

At BOSS, Business Owner Succession Strategies, we have the knowledge, skill, and experience to successfully guide you through your business exit strategy. We help business owners recognize the challenges of succession planning and how to implement appropriate solutions.

These are the top mistakes I see business owners make when planning their exit strategy and—most importantly—how you can avoid them.

Not Knowing Your Business Value

The first and most glaring mistake I see business owners make is not putting an accurate value on their business.

I completely understand that it’s a challenge to assign a value to your business. And potential buyers probably won’t feel the same way you do about the company you’ve worked so hard to build. But make no mistake, you risk overvaluing or undervaluing your company if you’re unsure about what makes it valuable.

These are the key factors you should consider when summing up your business’s value. Potential buyers will most likely examine these components when they’re deciding whether or not to buy your company.

• Diversified customer base
• Diversified product/service offering
• Free cash flow
• Owner centricity
• Management team strength
• Physical assets
• Intellectual property and digital assets

Once you have a ballpark figure for the value of your company, you can work to identify any gaps and enhance the company’s worth so you can meet your profit targets through the sale.

Postponing Exit Planning

Another costly mistake I see business owners make is delaying their exit planning. A good exit strategy has a number of moving parts that should be implemented over an adequate period of time, not at the last minute. These are the main time-sensitive components that affect a business exit:

• Strategizing and implementing the plan
• Getting the most value from your business
• Mitigating taxes
• Aligning personal wealth with income sources outside of the business

Even if you have no intention of selling your company anytime soon, you can alleviate some of the stress on yourself by creating your exit strategy well in advance. Some tax-efficient business sale techniques require advanced exit planning that takes more than a year or two. It’s never too early to meet with experienced advisors, even if you don’t plan to sell your business in the near future.

Not Defining Clear Reasons for Selling

Business owners have a tendency to prioritize short-term gains above long-term goals. While practical day-to-day business operations are important, it’s also essential to think about factors that affected your decision to sell.

If your sole motivation for wanting to sell is financial security, you could work with a financial advisor to find other strategies that don’t require selling. But if you’re selling for family or health-related reasons, then it might be a valid choice.

Unfortunately, you’ll likely regret your decision somewhere down the line if you don’t have a solid understanding of why you’re selling your business.

Not Seeking Professional Help

Lastly, as I’ve outlined above, getting ready to sell your business requires careful consideration of several different factors. Your smartest move is to start your business exit planning process with the help of a trusted financial advisor.

Your business sale can succeed or fail based on the quality of the team supporting you. Ideally, find an advisor that offers a complete plan that incorporates business, financial, and personal goals.

The BOSS team understands that transitioning out of a business can be a daunting task. Our advisors are here to help make the process as smooth and successful as possible. Our experienced exit planning advisors work closely with business owners to develop customized succession plans that align with their unique goals and needs.

We know every business is different, and we pride ourselves on providing personalized, tailored solutions for each of our clients. If you are a business owner looking to plan for your succession, we invite you to get in touch with us to learn more about how we can help.

Ease the Stress of Selling a Business

The weight of selling or transferring a business can be overwhelming.

Our team can alleviate some of that stress. If you’re coachable and two to five years from exit, we can help with your value acceleration, business planning, and personal finances in one comprehensive plan.