3 Benefits of Proper Business Exit Planning

Vikingmergers

Proper business exit planning means much more than just an owner trying to maximize the selling price of a business. Yes, selling for top dollar can certainly be one benefit of exit planning, but when done properly, there are additional layers of benefits to be found for not only the Seller, but also for the Buyer and for the business itself.

Proper Business Exit Planning:

1. Provides Clarity for the Owner/Seller 

Working through an exit plan will involve calculating how much money an owner needs in order to actually make the exit. Rather than simply selling the business for “as much as possible” or some other vague amount, a Seller will have specific metrics around which to set goals.

This may even be a point where a business valuation reveals that the business is not yet worth what the Seller needs. When that is the case, it makes a world of difference to have a goal line marked out. No more vague, “I can’t afford to exit yet,” but rather a quantified, “I will be in a position to exit when we reach XYZ.” 

Then, the business exit planning process can move forward to strategizing about how to reach XYZ. By helping the Seller identify precisely how much money is needed for an exit, concrete financial business goals and targets are established. 

2. Ensures Transferability to a Buyer

A transferable business is a huge benefit to a buyer, but it takes planning! Consider specialized knowledge or important customer relationships that are held by the Seller. Will that knowledge and those connections leave with the Seller? Lack of transferability is a major red flag to a Buyer.

Proper business exit planning will identify these areas of concern and help make needed shifts to ensure that the Owner/Seller is no longer “the hub of the wheel.” These shifts typically require building a strong management team, thereby diversifying the knowledge and talent pool of the organization. Spreading key responsibilities across multiple team members helps mitigate risk for a new owner.

3. Promotes Growth for the Business

A natural benefit that comes from clarity and transferability is the opportunity for the business itself to see growth. When a Seller is focused on reaching clear goals, growth happens. Likewise, when a business becomes transferable to a Buyer by no longer hinging on the presence of a single person, doors open to new growth, and everyone wins.

Simply put, proper business exit planning emphasizes the planning just as much as the exit. This perspective views a business exit as more than an end game, but rather an opportunity to define goals for the Seller, mitigate risk for the Buyer, and foster growth opportunities for the business itself. 

Remember that business exit planning done well takes time. That means the time to start that conversation may be sooner than you think. At Viking, we are committed to helping business owners achieve the very best result from – and for – their life’s work. We are here to help. Reach out to us today for a complimentary consultation.

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