When Vanessa Troyer and Chris Farentinos launched MailBoxes4Less.com in 2000, they didn't give much thought to how they'd exit the online mailbox distribution company.

All that changed in 2006. Recognizing the huge growth potential in manufacturing high-end mailboxes for builders and retailers, the Los Angeles couple decided to channel all their efforts into a second business, Architectural Mailboxes. This meant selling the highly profitable MailBoxes4Less.com to free up the necessary funds.

It wasn't a scenario most entrepreneurs envision when they think about exit strategies.

"No one was sick," says Troyer, 45. 'We didn't want to retire. Investors weren't saying 'I'm done.' There was no reason to sell the business."

But sell the couple did, garnering more than $1 million for the venture they'd founded eight years earlier with just $25,000.

It was the right move: Today Architectural Mailboxes continues to grow, with products in every Lowe's store in the nation and more than half of Home Depot's locations. Amazon carries 140 of the company's products. And, Troyer says, the business is on track to grow by 38 percent by the end of 2011.

Hoping to follow in Troyer and Farentinos' footsteps? Experts say the best way to ensure you leave your company when and how you want--with money in hand--is to start plotting your exit strategy now, even if you're still developing the business plan. Sadly, study after study shows that a majority of entrepreneurs have no exit strategy whatsoever in place.

If this sounds familiar, don't fret. You're about to get a crash course in preparing for two of the most common ways to successfully exit a business : turning the reins over to a relative and selling the company.

Succession Planning vs. Selling to an Outside Party
Planning your exit strategy is about making "a proactive series of decisions" instead of merely reacting to unexpected events like a heart attack or an economic downturn, says Ted Thomas, managing partner of Sun Exit Advisors , a business transition planning firm in Chicago.

"It's almost like the military: Before you go in, you want to know how you're going to get out," Thomas says.

The idea is to put in writing when you see yourself leaving your business, how much income you need to walk away with and how you see yourself transitioning out. Do you envision yourself eventually downshifting to consultant? Growing the business to sell it? Grooming an heir to take your place?

If your hope is to keep the business in the family, experts say the time is now to have the tough conversations with your spouse and children about whom you want to succeed you--and if they're even interested in the job.

"If you have buyers coming to look at your business, one of the first things they're going to ask is 'Have you talked to your family about this?'" says Terry Mackin, managing director at Generational Equity , a Dallas-based firm that helps middle market companies plan their exit strategy. "They don't want to come into a situation where the family is at odds about whether the business should be passed along."

"One of the greatest mistakes people make is assuming that a family member will want to or be able to take over the business," says Jack Garson, business attorney and author of How to Build a Business and Sell It for Millions . "Rather than trying to fit a square peg into a round hole," he says, sometimes the best way to provide for an heir is to "sell the business to somebody else and give the money to your kid."

If you do see selling as your exit, you need to focus your energy on creating a business that buyers will want. This means working on your profitability, competitive edge (so you stay profitable), sustainability (so you survive economic downturns), scalability (so the business grows) and corporate culture (so you hang onto good people), Garson advises.
"If you've got all this," he says, "people will be banging down the door to buy the company."

Finding the Right Advisors
As glamorous as selling your business may sound, entrepreneurs who've been there will tell you that it's an incredibly stressful, time-consuming process fraught with dozens of moving parts and truckloads of paperwork. If you don't hire the right financial, legal, tax and business advisors to help shepherd the sale through, you're doing yourself a great disservice.

"The mistakes you could make just getting the tax part wrong could cost you 50 percent of the proceeds of the sale," Garson says.

Along with an accountant and attorney well-versed in business sales and acquisitions, as well as a personal wealth manager, you'll probably want an experienced professional in your corner who can broker the deal--namely, a business broker or an investment banker.

"If you're selling the business for $500,000, you're using a business broker. If you're selling the business for $50 million, you're using an investment banker," Garson says, adding that the cutoff point between the two falls in the $5 to 10 million range.

Besides helping you set a realistic asking price and assembling the necessary marketing materials to entice sellers, brokers and investment bankers will discreetly contact potential buyers on your behalf.

"In general, sellers do not want anybody to know that they're selling the business," says business broker Sally Anne Hughes, owner of Hughes Klaiber a New York brokerage firm for midsize businesses. "If a client finds out the business is for sale, they might be concerned. Employees might also be concerned. Vendors might be concerned that they won't get paid."

To find a reputable broker or investment banker, get recommendations from your business advisors or entrepreneurs who've sold their business, Garson says. Be sure to vet any brokers or investment bankers you're contemplating working with as they predominantly work on commission.

"Ask them the average size and price of the businesses they've sold," suggests Architectural Mailboxes' Troyer. "If your company is worth $1 million and most of their sales are $7 million, you're not going to get much attention. You want to be with somebody who's selling businesses right around the price of yours."

Nipping Deal-Killers in the Bud

As with selling a home, the more time you spend getting organized and cleaning up eyesores, the more likely you'll be to sell your business without a hitch. (Likewise, should you keep the business in the family, the easier a time your successor will have picking up where you left off.)

"Think about potential deal-killers," Hughes says. "Before you put the business on the market, evaluate it with a broker, an accountant or an attorney and try to fix any areas that may present problems."

For starters, Garson advises, your financial records and tax returns from the last three to five years must be crystal clear, and your contracts with customers, vendors and employees must be current. Some other critical ducks to get in a row before courting buyers:

Financials. It's not enough to have your P&L statements and balance sheets shipshape, says Sun Exit Advisors' Thomas. "What's even more important is a cash flow report--how much money you have in the bank, and what you anticipate coming in the next week to 60 days," he explains.

Expenses. If you've been running personal expenses through the business, time to clean up your act, advises Generational Equity's Mackin. "We can talk about the legalities all day, but what happens is it depletes your business's value," he explains.

Employee classification. Incorrectly classifying employees as independent contractors isn't just a red flag for the IRS; it could scare off potential buyers, Hughes says. If you're unsure whether your people are employees or independent contractors, check with an employment attorney.

Operations. If you haven't empowered any of your staff to run the show should you miss a month of work, now's the time, Thomas says. Nothing's more dangerous to a business than an operations manual that only exists in the owner's head.

Employee turnover. The last thing you want is for key employees to leave while you're growing the company or negotiating a sale, Thomas says. Incentives like bonuses and stock options can help keep employees loyal.

Lease. "Make sure you have a good relationship with your landlord, especially if it's a retail business or restaurant that's reliant on a particular location," says Hughes, who's seen deals implode when a landlord wouldn't let a buyer assume a lease.

Inventory. If you have too much product, Hughes suggests liquidating it or writing it off and then cleaning up the warehouse--before buyers visit.

Facility. Clean, organize and spruce up all your physical locations. "Your books can be spic and span, but if a person walks into your place and it gives them the creeps, it lowers their trust," Thomas says.

Negotiating Like a Pro
Another surefire way to kill a sale is to get greedy during the negotiations.

"One of the classic pitfalls is going for more money or more anything because you think you can," says Avi Karnani, co-founder of Thrive, a free personal finance website that launched in 2008 and sold to LendingTree in 2009.

To avoid this trap, Karnani suggests identifying the offer terms you need to have (say, $10 million), want to have (autonomy within the parent company), and that would be nice to have (a corner office).

"If you don't spend time in the beginning making it clear what your needs, wants and nice-to-haves are, one of your stakeholders is going to say 'I really think we can get $11 million,'" he says. "You don't want one person to become the holdout."

You also don't want to sell to the first prospect that comes along.

"You need to talk to a number of buyers," Garson says. "You want to create a lot of interest in the company."

When it comes to choosing a buyer, "it's not just about the money," Mackin says. "It's about the interaction and the trust factor you have with the buyer. Eight times out of 10, my clients sell for what is not the best offer."

Troyer can relate. She and Farentinos received five offers on MailBoxes4Less.com. They didn't go with the buyer who offered the largest sum; they went with the one who paid in cash and had the best business pedigree.

"You'd better believe in the person you're selling to because you'll be working with them during the transition," Troyer says. And depending on your contract terms, some of the sales proceeds could be tied to the business remaining successful.

Keeping Your Eyes on the Prize
Exiting your company may feel more like a marathon than a sprint. In a good economy, experts say selling a business takes an average of nine months. The due diligence alone--during which the seller combs through all your documentation ("it's almost like an IRS audit or a deposition," Troyer says)--takes at least six weeks.
While courting buyers, it's imperative that you stick to business as usual.

"It's crucial that your sales numbers stay up and that your expense numbers stay down," Troyer says.

It's also crucial that your best employees stay focused on keeping the company successful. Too often, Garson says, owners will pull their rock stars from their posts and have them make the requisite presentations to potential buyers.

"It's a terrible thing to do," he says. Instead, he suggests, tap your investors or PR people to do these dog-and-pony shows.

"You have to continue to run the company as if nothing's going to change," Mackin says. "Buyers will want to see that you're running the business well. That's where you get the difference between selling the business and selling it at a premium price."

As for those discouraged by poor market conditions, "unless you have to sell, don't sell when the table's tilted against you," Garson says. "Work on building your business, making it stronger and positioning yourself for the future. You only get to sell this business once, so you might as well do it right."