5 Important Steps to Exit Planning
You took a chance. Maybe you quit your job or invested thousands of dollars into a business of your own. You worked hard, persevered through the tough times and built up a successful and profitable company.
That result may appear to be an end in and of itself, but there is one more step you need to be thinking about -- your exit. If you want to sell your online business, you’re going to require a strategy. There are a lot of different elements you need to be thinking about, and all of your records need to be up to date and in order.
The sale process can be daunting; so here are five important steps to take to plan your exit.
1. Time the sale.
When is the right time to sell your business? This largely depends on the type of business you’re selling, the consistency of the revenue and how long your business has been around.
Perhaps you decided to build an Amazon Affiliate site or an advertising site. This is a crucial decision that will factor into the sale of the business.
Ecommerce businesses, for example, tend to have both high and low sales periods, such as summer or the holiday season. Without an accurate understanding of these trends, you may not be able to sell your business for its true worth. A buyer isn’t going to want to buy your business when sales are low, just to wait around for them to pick up later in the year.
Timing, then, is everything. Fortunately, if your business has a longer track record, you'll have an easier time spotting the trends and helping prospective buyers understand fluctuations in your revenue.
So, determine whether or not seasonality factors into the sale of your business, and time the sale appropriately.
2. Get your financials in order.
Accurate and detailed financial information is essential to the eventual sale of your business.
Any buyer looking to invest in a business is going to want to gain a thorough understanding of its financials. Where is the money flowing? What sources of revenue does it have? It is recurring? What are its biggest expenses? How has the business performed historically?
While you aren’t obligated to answer every single question a prospective investor might come to you with, you should have extensive bank statements, spreadsheets and legers documenting the financial history of your business. Good bookkeeping is key.
Buyers are often looking for areas of the business they can improve, which means a spotless record isn’t necessarily going to be an advantage. Nevertheless, recurring and predictable revenue is very attractive to investors, so if your business is subscription-based, and the revenue is generated automatically, this can be a plus.
3. Develop standard operating procedures.
The harder it is to run your business, the more you’re going to limit your potential pool of buyers. Investors are often looking for businesses they can take over and get up and running in short order.
Documented standard operating procedures can mitigate complexities and make it easier for new owners and employees to take over and know exactly what they need to do to keep the business running smoothly.
Procedures need to be easy to understand, as anybody should be able to follow them to the completion of a task. These procedural documents are particularly attractive to prospective buyers, and they may even be necessary for the sale of a complex business.
Make a list of all of the tasks that need to be performed in your business. Determine how much time each of them takes, and what expertise or skills they require. Make your business easily transferable.
4. Prepare your website.
Is your website ready for sale? Does it have any errors or technical issues that you are aware of?
Buyers tend to shy away from businesses that have technical problems. You’re going to have a hard time selling a business that has known issues.
In order to prepare your website, you will need to conduct a thorough audit and fix any problems you uncover. This means validating links, making sure images are displaying properly and ensuring that all of your pages are functional. This means search-engine-optimizing your site, making it mobile friendly and optimizing load times. It also means evaluating your current hosting solution and any downtime you’ve experienced.
While preparing your website can be time consuming and laborious, the time you spend on this task will be well worth the effort, and will increase the likelihood that your business will be sold more quickly and with less effort.
5. Remove yourself from the business.
Pay attention to what's already been said about standard operating procedures, as that definitely applies here: As a business owner, you'll typically have functional roles within the company, and you may have installed yourself as its face and brand. But as you look to sell your business, you will need to uncouple yourself from its identity and make it easy for someone new to take over.
You will need to detail your role and what tasks you are responsible for. This can also be a part of your procedural documents.
You will need to make the buyer aware of any relationships and agreements you have in place that are vital to the business, and whether or not they are going to be transferred, and how.
You will need to audit and update your social media presence, as buyers may want to review your work history. You will also need to offer an explanation as to why you are selling your business. Remember to keep the message positive.
A proper exit strategy begins with awareness -- knowing what buyers are going to be looking for in a business. Then, it’s a matter of preparing the right information and ensuring the technical details are taken care of.
Whether you’ve sold a business before, or this is your first time, you should consider working with an experienced broker who can walk you through the exact steps. That way, you won’t be caught off guard.
Related: The High Costs of Your Exit Strategy
Remember: Exiting a business without a plan will prove difficult if not impossible. Take the time necessary to strategize in advance.
Entrepreneur Leadership Network Contributor