When you start a business, your main goal is usually to make it profitable. There aren’t many entrepreneurs who plan for an exit right at the get-go.
It’s only natural. As a driven entrepreneur, you have an idea, and you’re passionate about seeing your vision realized. Maybe you end up building a buyable business, maybe you don’t.
When it comes time to do something else and you want to sell your business, you might find that it’s not so easy as you might have imagined.
My advice to entrepreneurs is to always plan for an exit.
Regardless of what you end up doing, an exit plan will prompt you to make your business buyable.
So, how do you plan for an exit? In my experience helping people build buyable businesses and sell them, I’ve found there are two ways the sale usually goes.
Let’s dive in to see what they are!
An Opportunistic Sale
In 2006, MB Partners was hired to facilitate a sale of a civil engineering business. Two equal partners built a profitable company and saw that the market was hot for a sale.
They jumped at the opportunity and we found a buyer. After the first round of due diligence and an offer from the buyer, I thought we had a deal.
But, these two guys saw things differently. Some time had passed after we started the negotiations, and the opportunities looked different now.
They wanted more money. Now, it’s not unusual to go back to the table and ask for a better offer. The buyer agreed and we were again good to go.
At least, that’s what I thought. The sellers changed their minds at every perceived opportunity to increase the bid. We spent a lot of time and effort going back and forth.
Finally, I had figured out a solution only to realize the whole deal was bogus (read the whole story in my book).
These guys were opportunistic sellers with no plan in mind. They ended up keeping the business, going into bankruptcy and barely avoiding jail time.
Your story will most likely differ from theirs, but the underlying concept remains: when you chase every opportunity without a plan, you never know what might happen.
This is when a good strategy comes in to save the day.
A Strategic Sale
When I was still with MB Partners, I had four clients who had built a very profitable toy wholesale and retail business.
The business was well organized with processes and ran on a sophisticated IT system. So, when the time came to sell, we got plenty of highly competitive bids. The sale went like clockwork.
What made it so successful?
The four people at the helm had all had clear plans for their respective futures. They knew what they wanted to do after the sale. They had made their business buyable and didn’t have any second thoughts.
This sale was a major success and it was because they had figured out what their ideal lives should look like. They approached their exit plan strategically, and unlike opportunistic sellers, they succeeded.
As Yogi Berra said, “If you don’t know where you’re going, you might not get there”.
Know what your ideal life looks like and make your business buyable and you will have options, when opportunity knocks, or if a health or personal issue were to distract you.