One of the many challenges in creating a viable exit strategy for selling off your business interests is how to determine the timing.
Its one thing to say you want to work until your 55 and then sell the business, but it could be quite another to actually have a motivated buyer show up willing to pay your price.
So I propose the evergreen exit strategy whereby the business is always up for sale in a figurative sense i.e. there is no permanent for sale sign sticking out of the lawn or hanging from the side of the building.
With an evergreen exit plan, the business owner has developed the mind set that he or she cannot control when the best time is to sell, so they have to focus on what they can control, which is making sure everything in the business is up to date and supportive of a potential sale, and making sure that the day to day actions of the business are directed towards increasing the overall value of the business.
This mind set is not easy to develop as many business owners are more locked into the thinking that they will sell at retirement, period.
But an evergreen mind set always allows for the ability to consider and react to any opportunities that may arise at any time.
Think of it this way. If you’re 10 years away from your expected time of exit and a highly motivated buyer comes along for some reason and wants to offer you considerably more for your business than even you think its worth, would you not want to seriously consider any potential offers that interested party is prepared to make?
Even if you develop the proper mindset, there’s still some work that needs to be done to allow you to even seriously consider opportunities that may arise.
First, the business must maintain what I call a “sell-able” state of being. There has to be a continual effort to make sure that the financial statements are up to date, that all equipment and facilities are in a good state of repair, that regulatory issues or legal issues are dealt with quickly and not left to linger, that employee, customer, and supplier contracts are up to date, that the business has developed sufficient management depth to allow profitable operations to continue once the owner is gone, and so on.
If your business can’t stand up to the due diligence process of the prospective buyer and his or her advisers, then any opportunity that does materialize may just as quickly pass you buy.
Second, the business owner(s) has to be prepared to look at any opportunities quickly as motivated buyers don’t tend to stand still very long and could very well move on to the next best option.
Following this strategy also doesn’t require you to do anything if you don’t want to, or don’t feel the benefit is sufficient to sell. What it does do is allow you to be as opportunistic as you want to be.
Over a period of 10 to 30 years, the future is going to be very hard to predict. So when opportunity comes knocking, it may very well be worth opening the door and seeing what’s on the other side.