Seller Exit Strategy

The Value of an Exit Strategy

Selling your business can be an organized process where each step maximizes value and expedites the sale, or it can be a dismal failure full of gut wrenching interactions and a large amount of your money left on the table at the close. Fortunately, the choice is yours. A good Exit Strategy starts with a simple awareness of the process of selling your business and can be implemented in advance with very little additional effort.


Your Exit Strategy begins with awareness that one day you will sell your business. Every business owner does, sooner or later. It’s like death and taxes. They are inevitable. Reasons vary with each business owner and can be as simple as boredom with your own company that you have built, to complex issues such as health, divorce, or partnership issues. Only you know when it is time for you to sell. However, having a written Exit Strategy will assure you obtain maximum profit at the sale and great peace of mind should you be selling under less favorable circumstances such as poor health. You pay for insurance to protect your assets, why not implement an Exit Strategy now to insure you get maximum value for all your efforts?


Once you make the decision to sell, contacting a business broker to discuss the market conditions and the various options you have to sell your business is imperative. Most businesses less than $2 million in sales price are sold to other individuals and small businesses through a broker who facilitates the transaction representing your best interest. Buyers can be entrepreneurs that have the same zeal you had when you started your business or industry players that will purchase your business to expand or enhance theirs.  A qualified business broker can be instrumental in helping you develop a good Exit Strategy that encompasses the sale scenario viewed from every angle.


You will want to discuss the terms of any Buy/Sell Agreement with your business broker and other professionals like your attorney and CPA. Other agreements with partners, shareholders, landlords, customers, employees and others will be examined to ensure your goals, expectations, and terms and conditions of sale don’t create any conflicts during the Buyer’s due diligence process.  .


You need to view your Exit Strategy from the viewpoint of a buyer.  What would you want to know if you were to buy your business?  Do your financials match your Balance Sheets and Tax Returns?  Imagine the lack of Buyer confidence  that would arise if you found serious discrepancies  in your financial documents at the due diligence stage of the sale.  What about the physical state of your facility ? If you were the buyer would you want to walk in to a facility that needed immediate attention or would you prefer a facility that was neat, clean, and organized, allowing you to transition easily into the business matters at hand and not worry about housekeeping and safety issues? What is the attitude of your employees and what would clients of yours say about you and your company if they were randomly called?   Are your sales and profits on the increase and expenses on the decrease?  The purpose of the Exit Strategy is to apply a tiny amount of effort in the right direction each day to achieve maximum profit when you do sell.  Working on these issues a little bit each day brings huge profits and joy tomorrow.

Tax consequences from the  proceeds of the sale and what you will do with your time after the sale is finalized need to be considered.  Many times to close a deal you will be asked to help in some capacity with the transition.  You want to decide, in advance with the help of your tax attorney or CPA, how the proceeds of the sale will be best distributed and conserved. Owner financing terms, or all cash at closing will greatly affect your tax position and all options should be considered.  Can you get more for your business by offering terms on a carry-back note and still protect your interests and save on taxes?  Being proactive at this stage will greatly enhance profits at the sale.


With your plan laid out and front end players like a tax advisor and a business broker on your team, you can now break your plan down into bite-sized pieces that can be a part of your everyday business routine. This process of implementing little improvements on a daily basis produces maximum profits upon the sale of your business.  If your business sells for 10% more due to this exit planning, you may have just put $50,000, $100,000, $1,000,000 or more in your pocket by simply being prepared.


It’s my job to help orchestrate this process so you can achieve your goal. When the time is right for you to start, let me help you as I’ve helped many other clients previously.  Please feel free to call me with questions or for assistance.


Dick Flamos

Texas Industrial Business Brokers