As a business owner, you’re ready for almost anything. But recent data shows that even the most affluent and successful founders struggle with one common problem: the regret of how they handled leaving their company. In fact, according to the Exit Planning Institute, 78% of business owners regret leaving their business just one year after an exit.
While an exit may be close or years away, it would help if you understood what life after business could be. This level of clarity will help you hone in on the areas at risk today and ensure you are setting your next chapter up for success.
Here are the four key drivers to consider when exiting (or thinking about exiting) your business:
Why do you want to exit your business? What do you plan to do after you leave your company?
Most owners get pushed out of their business – a sad reality. But the happiest exits occur when an owner has an equal or more significant number of pull factors. Pull factors are your goals, hobbies or dreams post-business. They could include writing a book, sailing across the world, or starting a new venture.
Push factors would include scenarios such as old age, a health scare, or being burnt out. These are all things that are pressuring you to leave your business – though ultimately, you may not want to.
The happiest exits involve owners who have something pulling them out of their business — a vision for something they want to do in the future.
How much is your business worth to you? What’s your bottom line? Have you considered the practical financial questions surrounding your exit?
This includes an owner’s willingness to consider multiple exit scenarios. A lot of founders make the mistake of approaching their exit with a rigid vision of how they see their exit. They imagine an acquirer writing them an outlandish check in exchange for the keys, which the owner hands them as they ride off into the sunset. As we know, this is virtually never the case.
Most founders will have to stay on to help a new owner transition into their business. The more flexible an owner is as they approach their exit — keeping all of their options open — the more buyers will be interested in exploring a deal. More buyers at the table mean more competition, which in turn leads to higher valuations and better deal terms for the founder, which is why being flexible about how a deal is structured leads to better exits.
How attached are you personally to your business? Have you built a fulfilling life outside of your company?
The third driver of a happy exit is the degree to which the founder’s ego is dependent on his status as the owner of his company. Here we look at how long an owner has owned their business for, how much of it they own, and whether their name is on the door. All of these factors can lead to an owner becoming unwilling or unable to let go. For a happy exit, they need to have a healthy life outside of their business.
Have you considered how your employees would be treated when you exit your company?
This includes being proactive about how you want to treat your team as part of the exit process. This is a deeply personal issue for founders, some of whom would prefer not to tell employees for fear of word getting out among competitors. Others can’t imagine the duplicity of asking employees to join them in their business only to turn around and sell it from under their noses. There is no one-size-fits-all “right” answer to how a founder treats her team — the only truly wrong answer is to not think it through proactively.
How personally ready to exit are you? If selling your business or starting your next venture has ever crossed your mind (even in the slightest), take your free PREScore™ Exit Strategy Assessment Test to see how ready you would be:
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