As a business owner, exit planning should be an integral part of your strategic thinking from the very beginning. While it’s natural to focus on launching and growing your business, having a general idea of how you want to exit—even before you open your doors—sets the foundation for long-term success, sustainability, and optimal valuation when it’s time to sell.
How Prepared Are Most Business Owners for Exit? Why Does It Matter?
The statistics are telling. According to SC&H Group, 57%-67% of business owners with companies valued between $500,000 and $5 million have no exit strategy in place. SC&H Group reports that most business owners have 80-90% of their wealth tied up in their company, yet less than 30% of businesses that go to market will successfully sell.
Industry experts warn that last-minute exit planning often leads to “fire-sale” scenarios and disappointing offers. Studies show that business owners who fail to plan in advance risk losing 20-50% of their company’s value due to rushed sales (Sunbelt).
Why So Many Business Owners Wait Too Long to Plan Their Exit
Business owners juggle countless responsibilities, often consumed by the daily grind of running and scaling their companies. For smaller businesses, the owner is usually wearing many hats, leaving little time to think about an eventual exit. Spending 60-80 hours a week managing operations leaves little room for long-term planning.
Another reason for delay is economic uncertainty. Business owners often hesitate to plan their exit when markets are unpredictable. However, postponing your exit strategy due to market volatility can be costly. Imagine an owner delaying their exit plans until February 2020, only to be blindsided by the pandemic. Had they started planning earlier, their options would have been far more favourable.
No one expects a complete exit plan before landing your first customer, but waiting too long can reduce your business’s value, limit your pool of potential buyers, and force rushed decisions.
It’s Never Too Early to Start Planning Your Exit
Even if selling your business is years away, the best time to start planning is when your company begins to thrive—or ideally, as soon as it’s launched. Early planning offers more flexibility, maximises your valuation, and gives you time to address operational and financial weaknesses while you still can.
The longer the lead time, the more prepared you’ll be for a smooth transition when the right opportunity arises. Even without a clear exit timeline, having a plan in place ensures that your decisions align with your long-term personal and business goals.
Click here to read “Are You Ready for Your Exit? Creating an Exit Strategy.”
5 Quick Tips for Planning Your Exit
1. Define Your Exit Goals: Know what you want. Whether it’s selling to a third party, passing the business to a family member, or staying on as an advisor, having clarity on your exit vision is key.
2. Determine Valuation Early and Often: Regularly assess your company’s market value to make informed decisions that guide your long-term strategy.
3. Build a Strong Leadership Team: Having the right leadership in place now makes it easier to identify potential successors who align with your business’s future goals. Consider implementing a leadership development programme.
4. Get Your Books in Order: Keep your financials clean and up to date, resolve any outstanding legal or financial issues, and streamline administrative processes to ensure smooth operations.
5. Seek Support: Consult with a business coach, peer advisory board, financial advisor, business broker, or exit planning expert to help you craft a well-executed strategy.
Remember, while selling your company might be the final step in your entrepreneurial journey, the smartest strategy is to begin planning long before you’re ready to say goodbye.