A common mistake of many business owners is of being burnt-out and working in their businesses well past the point where they find it to be either fun or challenging. If this describes you, you may want to consider selling before its profits and value decline. If you are not ready to retire, you may make more money in a new business, which is fulfilling or energizing, which you acquire and manage after selling your current business.
If you don’t know how to get started, you are not alone. Few, if any, business owners know how to leave their business in style.
Leaving in style means leaving your business to the successor you choose, for the price you want at a time you pick. An Exit Plan makes all that possible. You may be thinking of selling to an insider, such as a key employee, co-owner, or family member. To get top dollar for a business, it should be sold to an outsider who normally has more cash & the ability to pay more.
There are four ways to get top dollar for your business:
- Determine the business value now. Will the sale of your business help you obtain financial security?
- Choose when to sell.
- Take action to increase the value of the business.
- Use the proper sales process to sell your business.
Choose When to Sell
Is the amount of money you will receive from a sale enough to accomplish personal, financial, and estate planning goals?
If not, for the next one to five years, do you have the drive to manage the day-to-day details of the childcare center business to increase its profits? Are you willing to continue with the intrinsic risks of business ownership that can reduce its value?
Do you believe that your Childcare Center will be worth more in a few years then it is now?
We have helped dozens of business owners with their exit planning over the years.
To learn about maximizing the value from the sale of all or part of your company, minimizing taxes when you transfer the business, understanding business transfers to family members, or any other questions that particularly interest you concerning the business sale process, please contact us. Working with business owners in their exit planning and getting ready to sell in the next few years is a part of our practice which we provide significant value to current business owners. We would be happy to brainstorm business exit options with you or to discuss any questions you may have.
What problems can develop if there is no exit plan… and the Owner dies?
Continuity of Business
- Bank Financing – Usually PERSONALLY Guaranteed by Owner – bank will re-examine
- Capitalization Shortfall – Business Owners periodically personally capitalize their companies because they keep little money in the companies.
- Obligations under the lease – if personally guaranteed, and the lease is scheduled to renew before a sale, Landlord will be less likely to renew lease without guarantees
- Bonding Capability – Bonding Company will re-examine
Loss of Key Talent – The Owner!
- The Owner’s talents, experience, relationships with customers, employees, and vendors may be difficult to replace.
- For Job Shop type businesses, prospective Jobs may disappear immediately
Loss of Employees and Customers
- Without a continuation plan immediately implemented, key and non-key employees will wonder where their next paycheck will come from.
- When the workforce leaves, contracts cannot be completed and are breached, work is unperformed, and creditors call in loans.
- Resulting losses require payment from Owner’s estate.
Business Owners are generally unprepared for Exit Planning/Business Sale
Few have a group of professionals (Business Broker/M&A firm, CPA, financial planner, attorney, succession planner, insurance specialist …) to meet as a group to review:
Financial performance & market conditions
Tax & legal issues
Business Valuation update – track work on value enhancements
Estimate of proceeds from future business sale
Likelihood of achieving Owner’s retirement objectives
Exit Plan options and team recommendations
Plan for succession to future generations
Tell the Business Owner when the business is NOT ready to sell, when NOT to sell, & when to sell.
Most childcare center owners are too busy managing the business to concentrate on Exit planning. Every major decision should consider valuations.
Is death the Business Owner’s exit strategy?… If so, the IRS will make all the decisions